Isolated, repudiated by his people and even shunned by his own party, George W. Bush – the lamest of lame ducks – still seems able to count on the support of at least one world leader: Stephen Harper.
And so it was on the weekend, as it has so often been in the past two years, that our prime minister provided rare support for Bush as the soon-to-be former president battled against a chorus of world leaders urgently calling for a set of badly needed reforms.
Just as Harper backed Bush’s effort to block global progress on climate change, this time he helped Bush stymie European-led efforts at the G20 summit in Washington to restore regulations to international financial markets.
It was the rollback of these regulations that allowed Wall Street to transform itself into a giant casino where tycoons made billions playing fast and loose with the life savings of ordinary citizens.
Harper’s resistance to European calls for tighter regulations is ironic, since he has the luxury of presiding over a country that’s been spared the worst of the financial meltdown, largely because of the Canadian tradition of tighter domestic financial regulations.
This has allowed Harper to ride out the current financial storm politically unscathed, even gaining re-election in the middle of it.
In fact, although Harper’s record on this has received little attention, his government had started to push Canada down the dangerous road toward looser financial regulation.
In its first budget in 2006, the Harper government changed the rules in ways that effectively opened up the Canadian mortgage market to U.S. insurers. Finance Minister Jim Flaherty noted that these “new players” would bring “greater choice and innovation” to the Canadian mortgage market. Unfortunately, they did just that. They introduced risky products – like mortgages amortized over 40 years with little or no down-payments.
The new mortgages quickly caught on. With their lower monthly payments, they made houses seem more affordable. In reality, however, they dramatically increased the cost of a home, roughly tripling it.
As the implosion of the U.S. housing market provided a vivid example of the pitfalls of looser mortgage regulations, Flaherty finally intervened last summer, tightening CMHC’s rules.
The Harper government has been even more aggressive pushing financial deregulation on developing countries.
Ellen Gould, a Vancouver-based trade consultant, notes that Ottawa has pressed developing nations to open their economies to the “supposedly superior services” offered by the financial institutions of the advanced world.
At the World Trade Organization negotiations in 2006, Canada played a leading role in pushing developing nations to accept rules that would allow their domestic banks and insurance companies to be taken over by foreign financial institutions – like the ones that have been collapsing on Wall Street recently.
The Canadian push for “financial liberalization” predates Harper. It was keenly advocated by Liberal governments as well. But the Harper government has continued to push for this sort of deregulation long after it should have known better, as recently as the WTO ministerial in July 2008.
One can draw solace perhaps from the realization that Canada doesn’t shape the course of world events. Still, it’s disappointing to realize that we’re using what little influence we have at organizations like the G20 to help the exiting Bush administration do this last bit of disservice to the world.