The Business of Defence

"Canada is open for business," Brian Mulroney declared at a gathering of American businessmen last fall. In December, an invited group of Pentagon officials toured our country to promote the involvement of Canadian business in US military production. Will the price of the economic recovery Mulroney has promised be increased integration into the American military industry?

By Coleman Romalis | 1985-03-01 12:00:00

THE CONSERVATIVE GOVERNMENT OF BRIAN Mulroney was elected last fall with an avalanche of support from across the country, largely as a repudiation of Pierre Trudeau's arrogance and of a Liberal Party which had lost touch with the people.

Hostility to the Liberals 'vas so intense that Mulroney was able to win a landslide by simply not committing himself to anything. His mellow phrases were empty containers which any imagination could fill: "a Government of national reconciliation," "a Government of economic renewal." However, we're now beginning to discover just what Mulroney's campaign rhetoric actually means, and the prospects are appalling. The CBC, the National Film Board, all of the agencies of national independence and identity are being shorn of their economic viability. And the now-you-see-it, now-you-don't "sacred trust" of universality in social programs is giving way to a new "sacred trust" of economic and military integration with the United States.

Almost the first act Prime Minister Mulroney took in September was to fly down to Washington to pay court to Ronald Reagan's Administration. Less than three months later, a Pentagon team of some 20 officials was in Halifax, beginning its national tour. B.C. Tory member Robert Wenman, Parliamentary secretary to then-Defence Minister Coates, could barely contain his glee.

"This visit is part of the bread and butter resulting from the enormous chemistry that developed between Prime Minister Mulroney and President Reagan during Mr. Mulroney's trip to Washington," Wenman announced in Halifax. "Defence trade is one of the easiest areas of free trade. The market potential in this area is enormous."

If this were not enough, within a week then-Defence Minister Coates took the opportunity, yet again, the link the Conservative Government insists on establishing between economic growth and military production. In a December 10th Parliamentary debate on the nuclear freeze option, Coates told the Commons, "A concrete example of what good relations with allies can achieve is to be found in the presence today in Canada of the United States briefing team on defence procurement:

"Secretary (Caspar) Weinberger and I will assist the business community in every way to achieve both their and our objective, which is, additional defence procurement for Canadian industry. We are talking about new, permanent, long-term jobs that will make our present industry more viable in the days ahead."

So this is what "economic renewal" means: cashing in on the US arms race. No moral qualms ever seem to cloud the skies of Mulroney, Sinclair Stevens and Robert Coates - the architects of this profoundly disturbing policy.


THE DILEMMA THIS LINK between economic development and military production poses for the peace movement is a serious one.

It's not enough to decry the militarism of the Tory Government, when the public perception is that they are fulfilling their primary mandate to create jobs. There is still an embittered hangover from the Trudeau period when Canadians felt abandoned by a Liberal Government which seemed insensitive to the economic distress wracking the society, and completely passive about reducing unemployment. From the public perspective, the Conservatives are at least taking an activist approach to job creation. And, if it worked in the US, why not here? People who are out of work or living daily with the threat of unemployment are not likely to support disarmament if they believe it will sabotage their immediate economic interests.

On the face of it, the US recovery is quite real. What is not so obvious is that, far from letting the free market forces of private enterprise determine economic direction, the Reagan Administration, despite its neo-conservative theoretical doctrine, is presiding over one of the greatest Keynesian experiments of modern times, with huge military and defence-related high technology contracts acting as the engine of the economy. Arthur Donner, an economist with A.R.A. Consultants, has little regard for the basis of the American "recovery."

"By running such a massive federal deficit, because of their huge military expenditures and a dollar which is way overvalued, the Reagan Administration is out of step with the rest of the whole western world - except for Canada,"

Donner says. "One of the results of their policy is that now they're running massive trade deficits, too."

In other words, the US recovery rests on a base which is shaky, unhealthy and morally repugnant. But in their zeal to attach themselves to the surging US economy, Canadian politicians and businessmen have been willing to swallow their misgivings, toe the American military line, sharply increase their own military expenditures, and try to grab as many defence-related contracts as possible.


AN EXAMPLE OF HOW FARthe Conservative Government is willing to go in compromising itself was External Affairs Minister Joe Clark's admission at the NATO meeting in Brussels that Canada is now re-thinking its Opposition to the American proposal to develop the unbelievably expensive and dangerous "Star Wars" technology. More than the cruise missile, more than the MX, Star Wars is a destabilizing development which could well be the trigger for a nuclear holocaust. Joe Clark knows this; he is not stupid. But in the dark shadow cast by Sinclair Stevens, he utters not a peep of dissent, as his more powerful Cabinet colleagues avariciously contemplate the high-tech contracts that Star Wars development will generate.

The writing was on the wall for Clark when Mulroney reorganized the Cabinet committee structure of his newly installed Government. The formerly powerful External Affairs and Defence Committee, which had been chaired by the External Affairs minister, and had reported directly to the Prime Minister, was abolished. Now the External Affairs minister must report to the "inner' cabinet," a super-committee known as Policies and Priorities, chaired by Prime Minister Mulroney where Clark sits as just one member on this committee along with such powerful ideological adversaries as Sinclair Stevens, Robert de Cotret and, until recently, Robert Coates.

Even more significantly, Joe Clark has been virtually cut out of trade decisions and responsibility. Trade Minister James Kelleher is nominally under the control of External Affairs, but in fact reports to and sits on Sinclair Steven's potent Economic and Regional Development Committee, while Stevens himself, as Minister of Regional Industrial Expansion, administers the Defence Industry Productivity (DIP) and Defence Production Sharing Arrangements (DPSA) programs which tie Canada to Pentagon and NATO demands. Alt trade matters therefore pass through Sinclair Stevens' arch-conservative hands before reaching the Policies and Priorities Committee. And Joe Clark's removal from trade decisions is a special kind of isolation, given the overwhelming importance attached to commercial activities by the Mulroney Government.

In examining the federal government's pursuit of defence contracts, it's difficult at this stage to know just how much of the Conservative approach is new, and how much is simply an intensification of the policy put in place by the previous Liberal Government through their Defence Industry Productivity (DIP) program and the Defence Production Sharing Arrangements (DPSA) with the United States. Al Rycroft, a software manufacturer in Ottawa who heads Initiatives for Peaceful Use of Technology (INPUT), sees the difference as one more of style than substance.

"The major change is that our doorbell is ringing. Business feels a lot bolder in bringing their ideas to government," says Rycroft. He feels that we are definitely seeing an active campaign to get more into military production.

Rycroft points to two examples of the direction we're heading in. The first is a report from the Business Council on National Issues, which he says represents some 140 big business corporations in Canada. Their report deals with economic priorities and calls for an 80% real increase in Canadian military expenditures. (See the article by Rycroft in this issue.)

The second example is a High-Technology Export Conference scheduled for March 18, 1985, in Ottawa, sponsored by the Department of External Affairs. The invitation sent out to high-tech businessmen reads: "the primary objective of the Conference is to promote increased interest and participation by Canadian manufacturers in foreign defence and high technology markets."

Rycroft, along with political and economic analysts of the arms race such as Ernie Regehr and Mel Watkins, observes that military spending "is actually a very poor way of generating jobs. Compared to other kinds of activity, such as health or education, military production of jobs is right at the bottom of the heap."

Regehr and Watkins cite an American study of the direct and indirect effects on employment of $1 billion of spending which "showed spending on the military yields a pay-off of 76,000 jobs, compared with 100,000 for construction, 139,000 for health services, 187,000 for education and 112,000 for tax cuts to consumers."

In addition, the arms race siphons off investment capital into capital-intensive research, development and production which is highly specialized and doesn't have as broad a spin-off for general economic growth as does peaceful industrial activity. By drawing capital and entrepreneurial energy away from alternative economic ventures with greater job-creation potentials, arms production weakens the economy rather than strengthening it, makes it more inflexible and less internationally competitive.

A 1982 report by the U.S. Council on Economic Priorities entitled "The Costs and Consequences of Reagan's Military Buildup" supports the argument that military spending is not good for a nation's economic well-being. For eleven major industrial countries in the West, in the years 1960-79, this report identifies a direct inverse relationship between military spending and manufacturing productivity. At one end of the spectrum are the United States and the UK, with the greatest shares of their gross domestic products used for military spending (8% and 6%, respectively), accompanied by the lowest rates of growth in manufacturing productivity. At the other end was Japan, with less than 1% spent on military, and by far the highest rate of manufacturing productivity.

In a telephone interview from Waterloo, Ernie Regehr, a researcher for the Institute of Peace and Conflict Studies, suggested that Canada "will get more involved in the arms race, but not because of a policy change." According to Regehr, "The sharpest rise took place under the Liberals during their last 4 years in office, through the DPSA program and high-technology conferences to encourage defence production."

"The Pentagon people are here right now really because of decisions made by Governments a lot earlier," Regehr said. "The US has a trade surplus under DPSA, so Canada now has to step up its exports to balance the trade. If there had been no change in Government, we still would have had a Pentagon trade team visiting the country."

"The Conservative rhetoric here has perhaps focussed the whole thing on what's happening. But it certainly was policy under the Liberals. And on the matter of investment policy, the Liberals had pretty thoroughly undermined FIRA (Foreign Investment Review Agency) by the time they left office," Regehr added, pointing to the tiny percentage of applications actually turned down.

Canada's increased military and military-industrial activity is taking place within a more comprehensive framework of economic and military integration with the United States. Many of the most prominent figures in the Conservative Government are ardent free-traders who take much of their economic guidance from Sylvia Ostry, the powerful Deputy Minister who is totally committed to the concept. Nevertheless, economic integration and free trade cannot yet claim victory as the established policy; debate continues within and outside government as to its wisdom, and surely numerous discussion papers will be produced before final decisions are taken.

Political scientist Mike Henderson, at York University in Toronto, has been making a special study of economic integration. He sees the present course as destructive of Canada's national interests, and considers the Mulroney Government's changes far more than just cosmetic. He disagrees with Ernie Regehr's view that the Tories are really just continuing policies put in place by the Liberals under Trudeau.

"It's true that FIRA passed virtually all of the takeover proposals which came before it," says Henderson, "but that misses the point that FIRA was a negotiating body: it negotiated the terms of agreement for the proposed investments, the number of jobs that would have to be created, etc. All of this was negotiated. Sinclair Stevens has gotten rid of the machinery to negotiate these terms That's a very significant change."


MUCH OF THIS ARTICLE has focussed on the practical aspects of the present Government program of "economic renewal" via tighter economic and military integration with the United States. However, at the core of the policy lies a question which is not so much economic as moral: do Canadians really want to base their economy on the production of weapons of mass destruction? Whether building support and delivery systems for nuclear warheads, or even materials as seemingly innocuous as mattresses or screws and bolts for military contracts, we are nevertheless feeding a behemoth which threatens catastrophic consequences for the world.

Canadians have often smugly considered themselves superior to some of the nationalistic excesses which have characterized the American political culture. They have been critical of the morally indefensible US military adventurism in Southeast Asia, in Nicaragua, Cuba, El Salvador and in Grenada. They have been out of sympathy with the wild rhetoric hurled at the Soviet Union by the Reagan Administration. Is all this to be quickly forgotten or ignored, as our businessmen and politicians scurry around trying to drum up more and more war-related contracts?

Somewhere in all this, there is an important moral issue that the Canadian peace movement must capture and convey to the public at large. Our message has to be that for the sake of short-term economic gains, the Conservative Government appears ready to play fast and loose with the very sovereignty of the country.

What the Tories have done to Joe Clark in his relationship to the government serves as a small-scale example of what they would do to Canada in its relationship to the United States. Just as Clark can no longer credibly advance views that would move the world along a path toward peace, and away from nuclear confrontation, so Canada cannot depart one iota from the course charted by President Reagan and the key members of his Administration.

The free-traders, the economic and military integrationists within the Mulroney Government, are banking on the hope that Canadians will find this policy acceptable.

"The peace movement is in very bad shape, and I think that is only right and proper," then-Defence Minister Coates told the Pentagon trade seminar in Winnipeg, last December.

If the peace movement is to bring some sanity to the international arms race, it has to dig in its heels, redouble its organizing efforts, and make Coates eat his words.

Coleman Romalis is an Associate Professor of Sociology at York University.

Peace Magazine March 1985

Peace Magazine March 1985, page 11. Some rights reserved.

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