Tablero de Distribución, equipos de protección y control

H. Tolga Bolukbasi

McGill University

‘The economist must study the present in the light of the past for the purpose of the future’

John Maynard Keynes

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Debates on a possible North American Monetary Union (NAMU) between the United States and Canada have been lingering since the early 1990s in a period in which there have been numerous interventions calling for establishing a fixed exchange regime with the US (Courchene 1990; Grubel 1992 and 1993;

1 _{Department of Sociology, McGill University, Montreal, Canada,}

[email protected]. I would like to thank Axel van den Berg, Melissa Padfield, Amy Verdun, Lloy Wylie, Patricia Young, and participants of the conference on ‘Britain and Canada and their Large Neighboring Monetary Unions’ convened by Amy Verdun and hosted by University of Victoria for their very helpful comments and criticisms on an earlier version of this paper. I would also like to thank the two anonymous referees for their insightful comments and extended discussions which helped me clarify my arguments. Any error remains my responsibility.

Harris 1993; Mundell 1990).2 After a few relatively dormant years, the debate has been re-launched in 1999 through lively discussions at various symposia, conferences, government inquiries, hearings, position papers, and academic exchanges including those in the popular press.3 _{This time, however, the debate}

revolved around establishing a full monetary union between Canada and the US with NAMU as the most preferred alternative against other forms of exchange rate fixing. Most notable among the reasons for the revival of the debate in Canada was perhaps the strong signals of the successful completion of currency union in Europe. With its successful introduction in 1999, the euro not only served as a catalyst in the Canadian policy debate but also conferred upon the proponents of a prospective NAMU a high degree of credibility.4

Several aspects of a future integration project surfaced on the Canadian policy agenda. In parallel with the literature on monetary integration in Europe these issues ranged from ‘calculating’ the economic costs and benefits to concerns around practical and political aspects of pooling sovereignty. The debate on the possible social consequences of NAMU, however, seems to be only in its incipient stages. It is, however, highly likely to intensify once the political initiative on establishing a North American single currency gains momentum.

It is interesting to observe that the arguments put forward by supporters and critics of the project highly resemble those in the European Economic and Monetary Union (EMU) debate. Drawing on parallels with the process of European monetary integration, both sides of the debate have acted on the presumption that a future NAMU would be based on the blueprint of the EMU à la Maastricht. Needless to say, while some commentators hail this possibility, others lament it. Yet they both expect that North American monetary unification would imply the imposition of stringent rules for macroeconomic discipline in general and fiscal rectitude in particular.

2 _{This paper evaluates the social consequences of a future NAMU between only Canada}

and the US for reasons of simplicity. The analysis could very well be extended to the case of a larger NAMU integrating Mexico.

3 _{See, for example, Grubel (this issue) and Bowles, Croci and MacLean (2003) who trace}

the growing interest in the academic, policy and public debate in currency integration in North America.

4 _{One main proponent notes ‘it was the advent of the euro in January 1999 that unleashed a}

veritable flood of interest, papers and conferences on the evolution of Canada-US and North American currency arrangements’ (Courchene 2001: 1). In the official policy debate, for example, in opening the Senate hearings on the issue Senator Michael Kirby concurs by referring to the launch of the euro in spurring the Canadian debate (Government of Canada 1999).

Despite their diametrically opposed political motivations, supporters and skeptics of NAMU alike seem to agree on the view that forming a currency union would unleash forces that would lead to the downsizing (or ‘rightsizing’ for some) of the Canadian welfare state. On the one hand, supporters look forward to the creation of a monetary union as they believe that a future North American Central Bank modeled after the European Central Bank would provide the ‘supranational public good’ of sound money through prioritizing stability of the new currency. To that end, NAMU is viewed to help secure stable public finances by imposing much-needed fiscal prudence as exemplified by the European experience. Moreover, in order to achieve macroeconomic discipline, it is claimed, the new central bank would denounce employment and welfare programs that would be inconsistent with its mandate. Supporters predict, therefore, that NAMU designed as such would, by rendering long overdue welfare reforms imperative, culminate in the ‘rightsizing’ of the welfare state.

Critics, on the other hand, claim that an EMU-style North American monetary integration would impose macroeconomic discipline and in particular excessive fiscal prudence leading to severe fiscal cutbacks. These cutbacks, they argue, would be exacted primarily from the social expenditure budget. By precluding the option of deficit financing in this way and constraining public outlays in general, critics predict, NAMU would compromise fiscal policies through which the Canadian Social Model is sustained. Consequently, these processes would lead to the dismantling of the Canadian welfare state which, in the eyes of many, is the institution par excellence that differentiates them from their US American neighbors.

I aim to contribute to this emerging debate on the future of the Canadian Social Model in the shadow of the possibility of establishing a currency union with the US, by putting the North American debate in comparative perspective. A survey of the debate on the North American case reveals that its starting point is the strong expectation that NAMU’s organizational structure will most likely be patterned after that of EMU. Given the successful launching of the bold European project, it is hardly surprising that debates on a blueprint for NAMU is informed by this experience. In addition to the expected similarities between the organizational structures of EMU and NAMU, the debate around NAMU’s future ramifications on the Canadian welfare state bears striking parallels with that on EMU’s social consequences on European welfare states. In these parallel debates, fiscal pressures emanating from monetary integration are expected to translate into inexorable constraints on welfare states.

Despite significant differences in terms of their origins and aims, parallels with respect to the debates on their organizational structures and their alleged

social consequences allow us to draw some insights from the European experience for the future of the Canadian welfare state. This paper will show that there are virtually no signs of systematic, across-the-board retrenchment in Europe’s welfare systems even in the face of severe EMU-induced fiscal constraints during the 1990s when EMU’s effects were expected to hit home. The analysis of welfare state expenditures in Europe below rests far from confirming the common prediction of a radical overhaul shared by all. In particular, in those countries that were exposed to EMU pressures most extensively, social protection levels point to signs of welfare state stability, if not expansion. Moreover comparative research on these critical cases which reveals that successive welfare reforms carried out in the name of EMU resulted in modest cutbacks confirm this finding. This body of research shows that the politics of welfare reform led to shelving of reform initiatives in most cases; in others it led to internal restructuring. In cases where reforms constituted retrenchment, their impact was postponed to future generations having no bearing on the immediate fiscal pressures emanating from EMU. Therefore, to the extent that NAMU resembles EMU, the lesson drawn from the European experience of the 1990s is that we do not need to expect a radical dismantling of the Canadian welfare state as a result of currency integration per se.5

In what follows, the second section will discuss NAMU’s possible governance structure and its transition phase with references to EMU’s as laid out in the Maastricht template. After providing a brief history of EMU, the third section will summarize the debate on the possible social consequences of EMU by identifying the main mechanisms suggested by the conventional wisdom shared by skeptics and supporters of the project. The fourth section will examine the fiscal state of affairs in the Eurozone in the early 1990s when the Maastricht convergence process began. In order to evaluate the predictions emanating from the Euro-skeptics’ and Euro-philes’ scenarios, it will trace welfare state trajectories by focusing on social protection expenditures and comparative case studies on Italy, Belgium and Greece. The paper shall conclude by drawing some lessons from the European experiment for the possible impact of NAMU on Canadian welfare futures.

5 _{While there are endogenous pressures the Canadian welfare state faces such as ageing}

population, transformations in labor markets, increasing healthcare costs due to technological advances, a discussion of these remains beyond the scope of this paper.

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