About Canada's Election Results: A Perspective

The January 26 election is going to be seen from the perspective of 25 years out as a historic hinge vote in terms of the Canada that becomes as a result.

I waited a week to venture an opinion because I was having trouble getting a signal out of the noise confusion of the results.

As Bill Belliveau noted in his Blog Insight, a mere change in 10 seats in Quebec moved the fulcrum of Canada's electoral politics from Centre Quebec west of Montreal to center east of Downtown Calgary's petroleum club chubbies. Au Contraire weighed in with his analysis from Downtown Quebec, where all is well.

The era that I and my fellow boomers grew up in as conscious voters watching national election results and the epic era of Pierre Trudeau are now laid to rest. At least for Atlantic Canadians.

It is a new era dawning in Federalism politics that may mean the loss of the capital F and in its place the small f emphasis of a financial clearing house or provincial financial network, rather than a strong centralist government with funded programs looking out for the weakest and tackling the strongest to share good fortune and minimize mis-fortune of geography in Canada.

I was in Ottawa as an association lobbyist during the creation of Trudeau famous and reviled in Western Canada, National Energy Policy. It was a traditional Liberalism and pan Canadian program that was meant to tax the lift Alberta would enjoy from newfound resources riches and allow for this lift to be spread among other Provinces with less natural advantage from geographic accidents.

Canada as a country is a federalism of accidents trying to be a country when the natural magnetic of markets runs north and south. It was a perverse Canadian idea to run a railroad east to west and declare it a sovereign country without and economy to prop it up. Hence our dependence on US markets and investments.

During much of the mid 70's, I ran a newly minted, national federation of local community newspaper ( once called weeklies ) association with an office in Toronto and Ottawa at the time. I would say on the rubber chicken circuit that I had all the problems of Pierre Trudeau with none of the powers of a Prime Minister in keeping my freshly cast, national federation united enough to pay my salary.

The Provincial Associations had all the money and liked it that way. National programs had to be negotiated with each association and all retained the right to opt out. Wait for Harper's first meeting with the rambunctious and independently minded Provincial Premiers and you will hear a lot more about a new version of participatory federalism. It was not what Trudeau who coined the phrase had in mind.

The context for me as a beleaguered federalist was that a short few years before the oldest national newspaper association in Canada had failed as a national body as provincial associations found that members would pay to belong to something that represented their more immediate and geographic interests, but had little stomach for paying national dues for something that appeared so far away, and of questionable relevance.

Other than retaining a federal subsidy on their mailing rates for their out of community subscriptions, who needed to be involved with the rest of Canada. Quebec thank you very much in 1977 was clearly on its own and would send an observer to shrug at entreaties to participate in any national program. It would be implemented with a French name and on their own schedule.

It is where I think we are headed in Quebec City and in Edmonton-Vancouver, if not Regina.

There is a message in there from my exposure to regional fractions for what I see happening now as a result of the January 23 vote.

It is the age of the bully at grade school and in Ottawa. There is going to be a lot of bullying in Canada that will have no effective referee because of the commitments made by the new Conservative Party to hold its natural voter constituency together.

We need to recall basic politic science course 101 on what it means to be of conservative philosophy as a voter and of liberal persuasion as a choice in how one is governed and by what means one hopes their neighbours and competitors are governed.

To be a conservative is to believe that there is a natural progression, if not an evolutionary model of economic growth that if you keep obstacles out of the way, the natural forces of market economics will lift all boats .....eventually. They hold dear the perspective that if left alone the poor among us will be reduced as lower taxation frees up more capital in the marketplace to invest in more things that bring higher yields in terms of dividends that can be further invested and perhaps spent on consumables that generate a growing and expanding economy.

Somewhere in there a consumption tax bring government revenues to spend on minimalist programs and jobs are created by expanding entrepreneurial investments. A sort of hands off the till form of government.

To read the sparse recent Conservative Party program of change and tax reduction promises, it is key to note that there will be a delay of six months in taxing a capital gain from an investment if it is further re-invested. There will be a reduction on the tax levied as the GST/HST burden on purchasing a new Porche, loaded SUV, or a glass plasma wall hanging TV of life size dimensions.

Since the poor consume less plasma TVs at a premium they get an advantage of paying less tax on smaller purchase items like clothing and non-food essentials such as home heating oil and gasoline.

Note the express bias of that comment. There is a rich getting richer and the poor getting poorer concept expressed there. Well as social activist Jesus apparently said in between ducking lynchings, poisonings, ethnic cleansing campaigns and being a poster child for crucification; the poor will always be among you. Apologies to St. James interpreters if I got the quote wrong, but the idea is the same. Poor people are part of the territory and apparently unavoidable. Perhaps the problem can never be solved. Liberals and their liberal on steroids brethren in the NDP believe that poverty is a war to be fought and someday won, if only the rich did not hold all the lever of power to protect their economic turf and dividends.

The irony that this election was lost on a RCMP confirmation letter for a complaint that some potential Liberal insiders inside the finance ministry tipped off their blood money relatives on Wall/Bay Street for insider trading that spooked the RCMP into tipping an election results is an irony that is not lost on me.

Talk about being hoisted on your own petard indeed.

Now, Liberals- large and small L, believe and are convinced that there needs to be human intervention to assist the challenged divine intervention to relieve social conditions. They hold that if the market place is left to decide the number of those becoming rich and getting rich, the natural result of market economics will grow rich in lower numbers than those who start poor and continue to be poor in greater numbers. They postulate that the growing poor class will perhaps be joined in this financial purgatory by some of those cast out of the natural selection club of the rich and richer as the natural market contracts and shrinks from seasonal market conditions.

The original dream of UIC was not lay abouts and seasonal fish workers in Atlantic Canada using it as a strategic weapon of self employment and survival, but as a cushion to prevent social upheaval and slow the spread of those getting poorer as a condition as a result of some market shift. Canada has turned UI into a social instrument of keeping the poor from rioting aka Palestine or Iraq.

So Liberals live to fashion government intervention, create programs that tax the growth of capital appreciation for the sake of appreciation and re-distribute that revenue stream into programs that elevate individuals in the direct opposite of conservatives who assume that a rising tide of economic growth will lift everyone's boat. However it is liberal Liberals who hold that damming the stream of money and creating a pool is a better way to make sure that everyone, whether they realize it or appreciate it or not, are elevated in terms of their quality of life.

Now this amateur explanation of random economics and political party adherents and persuasion is not meant to be accurate in a James Frey publishing world of ethical truths; this is just what I recall in my political memoirs of what I leaned in university political science. I majored in sociology and had to promise my profs on graduation that I would never attempt to teach or practice any course that I had taken. It shows here.

Now back to Harper and this election and the shifting of the fulcrum of political balance in Canada.

Quebec has the balance of political seat power to call the nest election on their timetable and everything to lose if they do so. Harper's promise to transfer Federal tax dollars to Provinces in an orgy of devolving centralist government strength is also the same complaint of Alberta's Have-A-Lot province of natural resources wishes. If Alberta has poor to feed, they will do it their own way and by the way anyone not working has to be of weak character as there are jobs going begging in the bush.

So if you are begging in Calgary, Winnipeg, Toronto or Moncton, best you get to the bush and work. New Brunswick's reality is that the population is quietly doing just that even as we speak.

Frank McKenna, once said several times in various ways as he dealt with his own disillusionment of his own time in office as Premier that he could have done far more, achieved far greater goals for himself and this Province that he somewhat perversely loves; if only he had oil revenues to re-distribute within the competing government departments along King and Queen Streets in Fredericton.

He even once mused as several of us who muse on such things with some kind of macabre fascination with the self destruction of New Brunswick's economy from high energy and low resource commodity prices globally, that staking us a car plant here would have changed the outcome of the Maritimes. It would not matter whether it was in Truro, Moncton or Edmunston, it would have changed the economic future of the Maritimes for a time while the cod, lobster, iron ore, softwood lumber and pulp fiber all peter out.

It is the same of Canada.

Ontario, once a power house of 1 in 6 jobs coming from the creation of the Auto Pact in the 1960's Pearson Liberal's economic development plan for Canada, where Pearson got the appreciative Americans to agree to a formula that allowed Canadian made cars to enter the US for sale as US products on a formula that did not penalize US companies from investing in Canada, made Ontario rich for about 50 years. The Auto Pact is trying to be retained, as it was only a 50 year plan, but when Ford, a staple in Ontario communities across the magnificent subdivisions of southern Ontario that have rendered the former agrarian landscape into endless rows of matchboxes, says it is shedding 30,000 employees; the end is near for economic growth from car plants.

And we still never got one, except for adding North American bumperettes to Made in Sweden Volvos in Halifax for awhile until they got the hang of energy absorbing bumpers to meet US regulations for Canadian assembled cars. We also got to remove the protective wrap off the cars for a while, but even technology has rendered that not a value added premise any longer.

So without a economic linchpin in our economy here in Atlantic Canada, we voted Liberal because we need a federalism that redistributes money to the poorer regions of Canada. A region that has no induced economy for growth from transplanted car plants or from the luck of the geography.

Geographical luck that saw the creation of the Rockies at the time of creation or cosmic boom, depending on your preferred vision of how we amoebas got to drive cars, which accidentally left a fossil fuel dump in the flat land of Alberta and Saskatchewan and perhaps the tundra of the new NWT provinces.

A World economy starving for new oil finds is ploughing money into Alberta, which is coincidently in Canada, at least for a time.

So the election of 2006 is the end of the gig started in Charlottetown with the Confederation concept that was based on every Province sharing its poor as well as its rich resources when found to create a Liberal's dream of an equalized Canada. A vision of Canada where the vagrant in Downtown Toronto, temporarily poor between marriages and drug additions could look forward to lower heating costs and subsidized welfare cheques from the riches found in Alberta and British Columbia. Or if Lobster and alder bushes suddenly become a source for curing cancer.

That dream took a big hit on election night 2006.

Under the reality of the Harper Conservative dream as I interpret it here in barely standing Atlantic Canada, those with natural riches and natural geographic selection of advantage get to keep what they happen to find under ground to fuel their economic development advantages within their territorial boundaries. Like a family on a picnic where the natural children get to have cake and ice cream and those adopted, well you know, its too bad, but you were just not born at the right time and place.

This is the new federalism of Canada, dressed up with nicer language, but no less brutal.

The Calgary-Edmonton view of federalism is one in which much is retained and little is shared, but much is asked.

That Quebec has a similar view of the federalism of the future in which they use their parliamentary dominance to extract even greater rewards, egged on by an appreciative Alberta and now Saskatchewan, which is also balking at being now a Have-Excess-Revenues-Must-Keep-In-Province, will insure that Harper is a successful Prime Minister.

Harper will reshape Canada. It will be in the image of the get out and do it with your pick up icon image of Western Canada and let the marketplace reward the victor.

Atlantic Canada needs to get ready for tough love medicine. My late father, a lifelong Liberal after witnessing a riot in Saint John City by long shoremen, induced by a Conservative Prime Minister during the Great Depression, who said in a speech there that started a deadly riot that it was not up to him to solve their economic problems causing my father that night to switch to being a Liberal; well he would rue this election day. I was profoundly influenced by his view of Liberal and liberal Canada.

Canada previous to last Monday was a dream perpetuated by a myth that we have something unique and valuable in being able to say that we govern an eighth or more of the World's mass from east to west in a contiguous continent tied together by railway lines and bad highways and not much else. So we built a government sponsored and redistributed economy to support that novel vision of nation building.

While it is possible that Atlantic Canada could somehow benefit from this election and the next 25 years. I for the life of me cannot see where the spark and the leadership is coming from. We have some marginal success companies here, but our future lies with New England and the real world tough life of the Yankee traders and marketplace from New Jersey north. If you notice where, outside New Brunswick the Irving's are investing big dollars, it is down the Atlantic Coast. They venture west to pick up the odd stranded asset from a departing US company, like their venerable sanitary products plant in old Toronto.

It is not for anything that they have their own nation building railroad that by default setting and track access runs north south and avoids going east to west. It recognizes that central Canada has never been particularly receptive to eastern Canada.

If you think it is hard to see the easter horizon from Toronto in order to understand what is Atlantic Canada, try it from the tallest floor of an office power center in today's Calgary. If the mountains don't get you on 360 view, the dominant night vision from Calgary's highest elevations are of gas flares flaming into the night. It is there empire to be harvested. It is the source of everything they think and do.

It is their source of economic wealth and growth and they see no reason to share it in order that a starving Lobster fisherman in PEI or the Bay of Fundy facing disappearing stocks of available product to market, should be subsidized in their lifestyle choices by a tax on their oil revenues.

Calgary has more in common with Denver than Moncton and despite the fact that West Jet flies to both locations, the decision makers go to Denver for their marching orders and the grease monkeys and cannon fodder for the war on fossil fuel energy production fly home to visit depleted family members in Moncton and Halifax. Everyone including the Lobster are depleting in Atlantic Canada.

While it sounds bleak, it does not have to be.

I think this is a 25 year cycle- maybe 50 at best. If my granddaughters both under three have to go to the West to get education and jobs with their father working at Mount A, but unable to finance their education in a Maritime Provinces university, even if they can somehow survive depleting financial support from Maritime governments, then Atlantic Canada will be a rump tourist theme park in the future.

Our coastline will be ringed with leisure homes owned by fly in wealth and occasional middle class visitors seeking relief from heat and drug induced gun violence in population centers.

Speaking to Rotary Clubs in 70's Alberta, then feeling poor but with optimism that they were the future of Canada, then, I used to joke that I came from Atlantic Canada and that they should not hold my temporary resident status in Toronto against me. They laughed hesitantly.

Emboldened, I would compliment on their burgeoning wealth in grain, cattle and oil finds. I would explain that I feared that Atlantic Canada was going to be declared a national park from Quebec City east and that all who entered the Park Entrance at Riverie du Loup would know that we had given up on economic development and were simply going to be paid by Ottawa to not pollute further the environment and live simply along pastoral and picturesque parkway highways stretched along the coastlines.

A population with a view and a pledge to not attempt economic diversification in return for a stable transfer program.

There, ( here in Atlantic Canada), I would suggest that we would practice our way of Maritime life, buying Lottery tickets and having all you can eat fish fests for the day when the rich of central and western Canada needed a place to visit for an economical summer vacation to see the way Canada started some 138 years ago. The audiences would love the wit and image of it in Drummheller's Rotary Club and laughed warmly.

We were not a threat as a region and everyone loved to hate Toronto and by extension Ottawa. Trudeau's National Energy Program made that visceral and remains to this day as a reason that the West wants in as we have heard ad nauseum in the run off for this election.

So what do I think of Monday lasts election. I do not think it a disaster. I think it is the natural order of things in Canada and that electoral politics has finally caught up with the reality in Canada.

The future is where our addiction to oil is best found. If there was any doubt, then the CBS 60 Minutes program of last Sunday night, shown on the evening prior to Canada's election, confirmed that Western Canada is in global ascent. Even all over the United States who envies us in Canada over our tar sands reserves and habitually refers to Alberta as the giant elephant in the room at meetings of US oil and gas associations.

And now the West has their own Prime Minister with an agenda for creating a made in Alberta vision of fiscal and social conservatism that oddly enough will play to the conservative and independentist minded Quebecers as these two power brokers play out the march to Canada of 2050.

Which leads us to the future of Frank McKenna and whether he could or even should try to turn this around by changing the fortunes and future of the once fabled Liberal Party, as the natural governing party of Canada. This is a brand image destroyed if ever there was one.

My advice to Frank McKenna, the largest political news story of January 2006, overshadowing even the election results with his Globe and Mail instant status as a contender in a hopeless contest in my mind is simple. Come home Frank.

Come home and help lead this region with an activist Atlantic Development Fund that invests in our own and seeks markets primarily in the northeast US, or wherever we can find them. Perhaps we need our own shared provincial network with a central investment bank to bring capital investment into what we can get going here.

Come home Frank and counsel your family owned manufacturing firm on how to best access US markets for the value added kitchen cabinets made in humble Shediac, where the Lobster is already slipping into history and historically low stocks in the Strait spell a cod fish ending for Northumberland Strait lobster processors. I really think that Frank should avoid the siren call of the ships of State, as a modern day political Hercules and work to expand his potential to employ Atlantic Canadians.

Lead by example and help teach Atlantic based firms how to build an economic future of independence.

We need to acknowledge the change in Canada's future where the conservative view of minimal intervention in market forces is in accent. We need to invest and build with domestic Atlantic pension funds in ourselves.

We need leadership in Atlantic Canada.

Our chances are slim of defeating a new wave of every Province for itself in Canada, aided and abetted by the legislative agenda of a Harper government to transfer funds and funding power to the Provinces with opt in and out federalism means we are on our own here.

Read the entrails of the Federal Liberal Party apparatus and their eat their own young mentality means that Frank will first have to renovate the party and then turn his attention on a youthful looking corporate sounding CEO in Harper. While Frank at my age of contemplated future approaching 60, has his best image high jacked by a sitting, minority Prime Minister Harper.

A couple of sacrificial and optical cabinet ministers from Atlantic Canadian ridings is not going to stem this tide. Canada of 2050 will look nothing like Canada of 2005 in terms of a sovereign and interventionist, liberal minded government building a unique vision of Canadianism.

If our internal bickering does not get us, globalization will as raw resources are shipped to lowest cost production points and back again as consumables in a North America that produces knowledge, but little else, once the oil runs out.

So, my advice is for McKenna to come home and find a cabal of like minded entrepreneurs and we will sell ourselves out of this situation. The old Liberal Liberalism of regional equality and resource sharing is so 1965.

We need to live and breath a regionalism with New England and the central US marketplace as a producer of IT related products, value added consumables like the Irving's are producing with fiber and the new clothing fiber from wood fiber in Nackawic and Atholville and build an airline based tourism traffic between the US and eastern Maine and Canada for our economic growth.

Anything we get from the rest of Canada will be accidental, in my opinion. Since this narrative will exist in some form until the server eats its hard drive, we will see how wrong or right this missive of analysis on the 2006 election is, or not, some years out.

For now, I salute the excitement I felt under the leadership of Trudeau and McKenna, and accept that I may never feel this excited about politics, potential, policy or a performing economy again.

We are on our own in Atlantic Canada.

China's Growth Cost Model-What Moncton-Canada Face as Competitor

As we enter the home stretch, it would appear that Canadian voters are considering changing Prime Ministers, but an interesting phenomena is lurking in the polls that the media have been hyping as part of the march of Harper to the Prime Minister's office.

The Fear Factor. Social Conservatism that is based on some interpretation of the religious right's moral order of social equlibrium.

There has always been a fear factor of a right wing or right minded conservative, Conservative streak in the social policies of Harper et al. It does appear that a significant number of Canadians are prepared to go over the cliff with the now dropped Proggresive, of Conservative Party. Many of these recent converts before the final electoral deluge are, according to deep polling numbers, pulling up short of voting Conservative and saying whoa a minute. Think Twice is a natural political phenomena in Canada.

As in any race, it ain't over till it's over, as Willie Mays used to say about baseball.

Now I am a Liberal. I believe that Brian Murphy is the best choice for Moncton and ditto Dominic and the rest of the Liberal candidates such as Paul Zed and Andy Scott, all of whom are political acquaintences of mine. I like them and admire their work and their commitment to accomplishment, large and small.

Having said that. I would like to spank most of the people around Paul Martin and encourage them to find better employment working for loan sharks, credit collection agencies and perhaps with a drug lord where accountability is more direct for screwing up and more final.

Paul Martin deserved better from his uber brigrade of trendy, Blackberry enabled acoloytes than what he got, He deserved common sense and egos held in check by modesty instead of enthusiasms run amuck executing policy and personalities in the name of the Prime Minister.

Canadians may pay a large price for their failure to provide sound counsel when a Prime Minister needed horse sense advice instead of highhorse command and control of issues.

Be that as it may, Canadians are making a choice and they need to be making it on the basis of who can best navigate this country through the shoals of the future. I like a lot about Harper and relish his cleaner broom concept of change; but change to what.

Everything is different for me this election. I cannot believe there is a woman of Canada with an interest in their right to be first among equals that will vote for a social reformer conservative that would impose religiousity in decision making over a woman's personal right from the age of consent to determine what she decides to do with her capability to give birth when, and where, and with whom she chooses. Ditto the he to he options.

And it is not just back seat or bedroom interpersonal morality among consenting adults of gender persuasion that I am concerned about.

I am more concerned that in an age where Canada is going to need to enhance its ability to govern from a single point of view and purpose; we are going to possibly devolve Canada into a clamorous opt in or opt out, Provincial perogative option governorance, in place of understanding that we have what the world wants and will take, if we squander our command and control of it.

That is the real command and control issue in this election. Not the personality of aides and Liberal camp hanger-ons.

The Conservatives are a national party that has earned the right to be a government. Next they need to recruit and present a leader that is more than educated in books, but strong in vision and conviction in terms of what Canada needs to be to compete in a dangerous World, where what we have, everyone wants and is prepared to purchase ( China ) or take by structured default ( US ), unless we remain an effective federation.

Ask yourself this, after reading the article that I have reprinted below, which is one of the more intelligent and thoughtful pieces on what China is today and where it is going. It is not a bogeyman, it is a real competitor that is coming after everything we have as a resource to produce and coming with everything we could produce for ourselves as a competitive product in the marketplace in order to move jobs and properity to China from Canada. And damn the consequences for themselves and for us.

This is not the time for social experimentation and creating a Canada of balkanized Provinces that in their differences create an opportunity for dissention and cloudiness of purpose and impairment of execution of Canada's requirement to govern itself with soverignity. Soverignity backed up by commitment of all Canadians to either pull together or pull apart and accept the consequences of each. And there will be consequences.

I have published a previous article from the Stratfor email newsletter before and this is the most recent one on China. It is the central article that should be debated and read in making a decision to vote for the Martin vision and competence in proven economic policy or the Harper theory that reducing the role of a central government will make Canada a kinder and gentler place to live.

I am including the aritcle in quotations to make sure that you realize that this is copied material that is not available to be linked to on another Stratfor site. Please use the order form below to get your own copy. The recent newsletter on Iran as a threat to Canada and the US and Europe, suddenly make's yesterday's decision by France to arm their nuclear submarines with live war heads more understandable.

We live in treacherous times and for that reason this time, I am again voting Liberal, in order that the Conservatives go back to their benches and bring Canadians a better and more thoughtful choice. Tactics in self depreciation and re-packaging should not decide an election.

Do you have a friend or acquaintance that would benefit from the consistent actionable
intelligence of the FREE STRATFOR Weekly Geopolitical Intelligence Report? Send them to Stratfor Newsletter sign up and begin receiving the Stratfor Weekly every Tuesday for FREE!


Dissecting the 'Chinese Miracle'
By Peter Zeihan

The "Chinese miracle" has been a leading economic story for several years now.

The headlines are familiar:

• "China's GDP Growth Fastest in Asia."
• "China Overtakes United Kingdom as Fourth-Largest Economy."
• "China Becomes World's Second-Largest Energy Consumer."
• "China Revises GDP Growth Rates Upward -- Again."

Everywhere, one can find news articles about China, rising like a phoenix from the economic debris of its Maoist system to change and challenge the world in every way imaginable. But just like the phoenix, the idea of an inevitable Chinese juggernaut is a myth.

Moreover, Western markets have been at least subconsciously aware of this for a decade.

More than half of the $1.1 trillion in foreign direct investment that has flowed into China since 1995 has not been foreign at all, but money recirculated through tax havens by various local businessmen and governing officials looking to avoid taxation. Of the remainder, Western investment into China has remained startlingly constant at about $7 billion annually. Only Asian investors whose systems are often plagued (like Japan's) by similar problems of profitability or (like Indonesia's) outright collapse have been increasing their exposure in China.

Once the numbers are broken down, it's clear that the reality of China does not live up to the hype. While it is true that growth rates have been extremely strong, growth does not necessarily equal health.

China's core problem, the inability to allocate capital efficiently, is embedded in its development model. The goals of that model -- rapid urbanization, mass employment and maximization of capital flow -- have been met, but to the detriment of profitability and return on capital.

In time, China is likely to find itself undone not only by its failures, but also by its successes.

The Chinese Model

Until very recently, China's economic system operated in this way:State-owned banks held a monopoly on deposits in the country, allowing them to take advantage of Asians' legendary savings rate and thus ensuring a massive pool of capital.

The state banks then lent to state-owned enterprises (SOEs). This served two purposes.

First, it kept the money in the family and assisted Beijing in maintaining control of the broader economic and political system.

Second, because loans were disbursed frequently and at subsidized rates -- and banks did not insist upon strict repayment -- the state was able to guarantee ongoing employment to the Chinese masses.

This last point was -- and remains -- of critical importance to the Chinese Politburo: they know what can happen when the proletariat rises in anger. That is, after all, how they became the Politburo in the first place.

The cost of keeping the money circulating in this way, of course, is that China's state firms are now so indebted as to make their balance sheets a joke, and the banks are swimming in bad debts -- independent estimates peg the amount at around 35-50 percent of the country's GDP.

Yet so long as the economic system remains closed, the process can be kept up ad infinitum: After all, what does it matter if the banks are broke if they are state-backed and shielded from competition and enjoy exclusive access to all of the country's depositors?

This system, initiated under Deng Xiaoping in 1979, served China well for years. It yielded unrestricted growth and rapid urbanization, and helped China emerge as a major economic power. And so long as China kept its financial system under wraps, it would remain invulnerable.

But the dawning problem is that China is not in its own little world: It is now a World Trade Organization member, and nearly half of its GDP is locked up in international trade. Its WTO commitments dictate that by December, Beijing must allow any interested foreign companies to compete in the Chinese banking market without restriction.

But without some fairly severe adjustments, this shift would swiftly suck the capital out of the Chinese banking system. After all, if you are a Chinese depositor, who would you put your money with -- a foreign bank offering 2 percent interest and a passbook that means something, or a local state bank that can (probably) be counted on to give your money back (without interest)?

The Chinese are well aware of their problems, and perhaps their greatest asset at this point is that -- unlike the Soviets before them -- they are hiding neither the nature nor the size of the problem. Chinese state media have been reporting on the bad loan issue for the better part of two years, and state officials regularly consult each other as well as academics and businesspeople on what precisely they should do to avert a catastrophe.

The result has been a series of stopgap measures to buy time. Among these, the most far-reaching initiative has been a partial reform of the financial sector. The government has founded a series of asset-management companies to take over the bad loans from the state banks, thus scrubbing them free of most of the nonperforming loans. The scrubbed banks are then opened up so that interested foreign investors can purchase shares.

So far as it goes, this is a win-win scenario: Foreign banks get access to assets in-country before the December jump-in date, and the state banks avoid meltdown.

In addition, a measure of foreign management expertise is injected into the system that hopefully will teach the state banks how to lend appropriately and -- if all goes well -- lead to the formation of a healthy financial sector.

At the same time, the deep-pocketed foreign companies come away with a vested interest in keeping their new partners -- and by extension, the Chinese government -- fully afloat.The only downside is that central government, through its asset-management firms, assumes responsibility for financially supporting all of China's loss-making state-owned enterprises. But this rather ingenious banking shell game addresses only the immediate problem of a looming financial catastrophe.

Left completely untouched is the existence of a few hundred billion dollars in dud loans -- linked to tens of thousands of dud firms for which the central government is now directly responsible. Which still leaves for China the unsettled question: "Now what do we do?"

Two Opposing "Solutions"

As can be expected from a country that just underwent a leadership change, there are two competing solutions.The first solution belongs to the generation of leadership personified by Deng Xiaoping and Jiang Zemin, and could be summed up as a philosophy of "Grow faster and it will all work out."

It could be said that during Jiang's presidency, while the leadership certainly perceived China's debt problem, they -- like their counterparts in Japan -- felt that attacking the problem at its source-- the banking system -- would lead to an economic collapse (not to mention infuriate political supporters who benefited greatly from the system of cheap credit).

Jiang's recommendation was that everyone should build everything imaginable in hopes that the resulting massive growth and development would help catapult China to "developed country" status -- or, at the very least, raise overall wealth levels sufficiently that the population would not turn rebellious. In the minds of Jiang and his generation of leaders, the belief was that only rapid economic growth -- defined as that in excess of 8 percent annually -- could contain growing unemployment and urbanization pressures and thus hold social instability at bay.

The second solution comes from the current generation of leadership, represented by President Hu Jintao. This solution calls for rationalizing both development goals and credit allocation. The leadership wants to eliminate the "growth for its own sake" philosophy, consolidate inefficient producers and upgrade everything with a liberal dose of technology.

Key to this strategy is a centrally planned effort to focus economic development on the inland areas that need it most -- and this entails tighter control over credit. Hu wants loans to go only to enterprises that will use money efficiently or to projects that serve specific national development goals -- narrowing the rich-poor, urban-rural and coastal-interior gaps in particular.

There are massive drawbacks to either solution.

Regional and local governors enthusiastically seized upon Jiang's program to massively expand their own personal fiefdoms. And as corporate empires of these local leaders grew, so too did Chinese demand for every conceivable industrial commodity. One result was the massive increases in commodity prices of 2003 and 2004, but the results for the Chinese economy were negligible.

China consumes

• 12 percent of global energy,
• 25 percent of aluminum,
• 28 percent of steel and,
• 42 percent of cement --
• but is responsible for only 4.3 percent of total global economic output.

Ultimately, while "solution" espoused by Jiang's generation did forestall a civil breakdown, it also saddled China with thousands of new non-competitive projects, even more bad debt, and a culture of corruption so deep that cases of applied capital punishment for graft and embezzlement have soared into the thousands.

Yet the potential drawbacks of the solution offered by Hu's generation are even worse. In attempting to consolidate, modernize and rationalize Jiang's legacy, Hu's government is butting heads with nearly all of the country's local and regional leaderships. These people did quite well for themselves under Jiang and are not letting go of their wealth easily.

Such resistance has forced the Hu government to reform by a thousand pinpricks, needling specific local leaders on specific projects while using control of the asset management firms as a financial hammer. After all, since the central government relieved the state banks of their bad loan burden, it now has the perfect tool to strip power from those local leaders who prove less-than-enthusiastic about the changes in government policy.

Or at least that is how it is supposed to work. Local government officials have become so entrenched in their economic and political fiefdoms that they are, at best, simply ignoring the central government or, at worst, actively impeding central government edicts. Hu's team is indeed making progress, but with the problem mammoth and the resistance both entrenched and stubborn, they can move only so fast for fear of risking a broader collapse or rebellion.

And this does not take into consideration Beijing's efforts to strengthen the Chinese interior -- where the poorest Chinese actually live. Complicating matters even more, Hu's strategy relies upon the central government's ability to wring money out of the wealthy coastal regions to pay for the reconstruction of the interior.That has made the coastal leaders even more disgruntled.

However, they have come upon a fresh source of funding, replacing the traditional sources of capital that now are drying up as a result of the personnel changes in Beijing: the underground lending system, which was spurred by the official government monopoly over banks in years past.

The central government now estimates that the underground banking sector is worth 800 billion yuan, or some 28 percent of the value of all loans granted in country.

Dealing with Failure -- And Success

The question in our mind is which strategy will fail -- or even succeed -- first.

If Jiang's system prevails, then growth will continue, along with the attendant rise in commodity prices -- but at the cost of growing income disparity and environmental degradation.

The likely outcome of such "success" would be a broad rebellion by the country's interior regions as money becomes increasingly concentrated in the coastal regions long favored by Jiang.

And that is assuming the financial system does not collapse first under its own weight.Local rebellions in China's rural regions have already become common, but two of are particular note.In March, the villagers of Huaxi in the Zhejiang region protested against a local official who had used his connections to build a chemical plant on the outskirts of town.

When rumors of police brutality surfaced, some 20,000 villagers quite literally seized control of the town from 3,000 security personnel. Before all was said and done, the villagers invited regional press agencies in to chronicle events in the town that had told the Politburo to go to hell, and started burning police property and parading riot control equipment before anyone who would watch. They actually sold tickets to their rebellion.

Huaxi marked the first time local officials actually lost control of a town.Then, in December, protests erupted against a local official in Shanwei, who had similarly lined his pockets with the money that was supposed to have been made available to farmers displaced by his expanding wind-power farm.

The local governor figured that since he was investing not just in an energy-generating project in energy-starved China, but a green energy project, that he would have carte blanche to run events as he saw fit. He was right. When the protests turned violent, government forces opened fire -- the first authorized use of force by government troops against protesters since the Tiananmen Square incident in 1989.

Such events are, in part, evidence of a degree of success for the strategy espoused by Jiang's generation.

The grow-grow-grow policy results in massive demand for labor by tens of thousands of economically questionable -- and typically state-owned -- corporations. T

his, in turn, draws workers from the rural regions to the rapidly expanding urban centers by the tens of millions. The dominant sense among those who are left behind -- or those who find their urban experiences less-than-savory -- is that they have been exploited.

This is particularly true in places like Shanwei, on the outskirts of urban regions, when urban governors begin confiscating agricultural land for their pet projects. But for all the complications created by Jiang's solution to China's economic challenges, it is Hu's counter-solution that could truly shatter the system.

In addition to dealing with all the corrupt flotsam and high-priced jetsam of Jiang's policies, Hu must rip down what Jiang set out to accomplish: thousands of fresh enterprises that are unencumbered by profit concerns. A steady culling of China's non-competitive industry is perhaps a good idea from the central government's point of view -- and essential for the transformation of the Chinese economy into one that would actually be viable in the long term -- but not if you happen to be one of the local officials who personally benefited from Jiang's policies.

The approach of Hu's generation is nothing less than an attempt to recast the country in a mold that is loosely based on Western economics and finance. Even in the best-case scenario, the central government not only needs to put thousands of mewling firms to the sword and deal with the massive unemployment that will result, it also needs to eliminate the businessmen and governing officials who did well under the previous system (which did not even begin to loosen its grip until 2003).

And the only way Beijing can pay for its efforts to develop the interior is to tax the coast dry at the same time it is being gutted politically and economically. The challenge is to keep this undeclared war at a tolerable level, even while ratcheting up pressure on the coastal lords in terms of both taxation and rationalization.

But just as Jiang's "solution" faces the doomsday possibility of a long rural march to rebellion, Hu's strategy well might trigger a coastal revolution.

As the central government gradually increases its pressure on the assets and power of China's coastal lords, there is a danger that those in the coastal regions will do what anyone would in such a situation: reach out for whatever allies -- economic and political -- might become available.

And if China's history is any guide, they will not stop reaching simply because they reach the ocean. The last time China's coastal provinces rebelled, they achieved de facto independence -- by helping foreign powers secure spheres of influence -- during the Boxer Rebellion.

This resulted, among things, in a near-total breakdown of central authority.

Send questions or comments on this article to analysis@stratfor.com

To read more commentary like this one, please subscribe to www.stratfor.com

Moncton-Sarasota-Bradenton Airports-Direct Launching

The Moncton Airport-is earning its International stripes this year in 2006 in every increasing volumes of cargo, both in boxes and in seat sales to distant locations.

Starting in May-June there will be direct flights to New York from Moncton and I am going to dance a gig when that first big bird takes off with the Continental logo on the tail fin as it arches over Dieppe, Moncton and points south.

But what we in Moncton must not lose site of it that we are a gathering aggregator of fun in the sun spots for Winter escapes. It is this day in and weekend out traffic that is helping Greater Moncton International become the premier airport service center of New Brunswick.

What is interesting is reading the local newspaper in Sarasota Florida where the Moncton service will land after departing from Moncton with flights under way there now. See your CanJet web site for details.

The following business profile was published recently in December 2005 in Bradenton-Sarasota area. The story is in italics.

CanJet service begins; 7 weekly flights comingCanJet this month started its winter service to Sarasota-Bradenton International Airport.

By February 2006, there will be seven weekly flights, more than twice last year's three flights a week.The airline also got more than twice the advertising subsidy from the airport, $95,000 instead of $35,000.

In addition to marketing to Fort Lauderdale, Orlando and West Palm Beach, CanJet will use the money to create a separate campaign for Sarasota, which will get flights from two new cities: Moncton, New Brunswick, and Halifax, Nova Scotia, in February.

Considering each CanJet flight generates an estimated $1,500 in airport revenue, airport chief executive Fred Piccolo said the subsidy is worth it.

That $1,500 estimate is what passengers might spend on newspapers, food and the like, plus fees that go directly to the airport's coffers.-- Kathleen McLaughlin

Airports in the US are run like businesses here in Canada and they know the value of a visitor.

If you are thinking about flying south this winter, then please accept this warm invitation to gly out of Moncton to even a warmer spot and welcome in Florida.

Flaps up.

Moncton-Spielo's Parent Sold-Globilization-Gaming

Breaking Local Moncton News: Spielo, one of Moncton's premiere success business stories of the past 14 years localed in Caledonia Industrial Park, is about to get a new, global investment parent, as a press release being circulated today January 12 reports.

Spielo's gaming company profile and recent business expansion announcement in 2005.

Gtech's Spielo has had a long and profitable business and supplier relationship with Moncton-based Atlantic Lottery Corporation.

More commentary on this significant sale in subsequent Local Moncton Web posts, as Spielo has an interesting background and is one of former Premier Frank McKenna's government business development success stories.

Get the financial profile and business interests of this major Italian firm in their corporate business financials profile of Lottomatica, Moncton's newest corporate interests owner.

LOTTOMATICA AGREES TO ACQUIRE GTECH -OWNER'S of MONCTON-SPIELO TO CREATE LEADING GLOBAL FOCUSED GAMING SOLUTIONS COMPANY

GTECH announced today that Lottomatica, the exclusive license holder and operator of Italy’s Lotto, one of the world’s largest lotteries, and GTECH have entered into an agreement pursuant to which Lottomatica will acquire GTECH for $35 in cash per outstanding GTECH share.

“We are proud to partner with Lottomatica and De Agostini S.p.A., a privately-held, Italian diversified industrial and financial holding company that is Lottomatica’s majority shareholder, to create the largest global, vertically integrated operator and solutions provider to the international lottery market,” said Bruce Turner.

“During the past several years, we have firmly established GTECH as the leading global lottery provider with strong positions in gaming solutions and commercial services, with a commitment to integrity and customer service. At the same time, Lottomatica has successfully grown one of the world’s largest, most profitable, and most complex lotteries. The combined company will have considerable scale and financial strength, superior customer solutions, and significant long-term growth prospects.”

Following completion of the transaction, which is expected to occur in mid-2006, GTECH will continue to operate as a separate business unit within a newly formed Lottomatica group structure.

The group is to be headquartered in Rome and GTECH will continue to be headquartered in Rhode Island. The transaction is not expected to involve any substantial disruptions to the workforces of either GTECH or Lottomatica due to minimal operational and geographic overlap.

Marco Sala, current General Manager of Lottomatica, said,

“The acquisition of GTECH further enhances our expertise, capabilities, and technologies, which will benefit our operations in Italy and in other markets around the world. Our Italian team looks forward to sharing ideas and strategies with our new colleagues as we work together to strengthen the new Lottomatica’s global leadership position.”

Upon completion of the acquisition, Bruce Turner and Jaymin Patel are expected to become CEO and CFO, respectively, of Lottomatica, while maintaining their respective positions at GTECH. GTECH’s other current officers and management team are also expected to remain in their positions with GTECH. Bruce will also join the Lottomatica Board of Directors.

“My colleagues and I are pleased that the combined company will retain our existing commitments to the Rhode Island community and that GTECH’s operations will remain intact and poised for additional growth,” Bruce concluded.


The transaction is subject to a number of conditions that may or may not be met.

Where NB's Future Growth Will Come From

Greater Moncton like the rest of the Province of New Brunswick is looking for the secret key to future NB economic growth.

The recent posts of David Campbell and Alec Bruce are all focused on future growth because we are at a cross roads.

We either make immediate and substantial stratetic changes now at all levels of government and community leadership, or the NB economic indicators, like New Brunswick's population decline ,are going to go against us, big time.

This morning over my morning wake up coffee, CBC NewsMorning broadbcasting from the Yarmouth bellweather riding of West Nova ran an interesting story. It was an eye opening experience and a light bulb went off. It is so obivious.

A shipyard, historically making lobster and inshore/offshore fishing boats since 1938 has weathered changing technology and resources to the point that they barely use wood for boats anymore. Instead they are using composites and using terms like carbon fibre and other exotics of new manufacturing procedure.

But they also did something else. Sitting in safety on September 11, 2001 as the Twin Towers down the coastline in New York fell, they asked what does that mean for us. The result is a stealth design boat for coastal and inland water interdictions.

Stealth in that is has optical paint schemes that make it look like a camaflaouge jacket rather than a boat. The design is ligth and sleek and a cross between a fishing boat and a speed boat.

They see a market selling their design and composite usage skills in manufacturing to build to spec. the Homeland Security special. The company, a small family manufacturing firm of three generations, is the model for what works in small communities and if enough of them are around spread across a Province, then the Provincial GNP starts to take care of itself.

The missing part of the story was weather any government program exists that can really help them. The gloss over story failed to mention what banking and financing shenigans the company has to go through to stay in business. The plant is like one of those museum pieces and looks nothing like what a South Korean or Asian manufacturing plant might look like today, but there is a market sensitive business building out there.

We need to find a series of potential winners in every county and City in New Brunswick and grow the hell out of them. We need to ask them what they need to grow and make it happen. More on this topic as time permits.

Here's the qwick profile of the company that was highlighted on the CBC this morning.

A.F. Theriault & Son Ltd. is one of the largest privately owned shipyards in Canada's Atlantic Region. This family business was founded in 1938 by Augustin Theriault in an era where wooden 3-masted sailing ships ruled the seas. Today, state of the art fishing boats, pleasure yachts and catamarans, combining old techniques with the latest trends and technologies, are built of steel, aluminum, fibreglass and composites.

A 2003 report on problem in the Nova Scotia Boat building industry.

Politics of Cruelty-Canadian Style-PM Martin-Dangerfield of Politics

The local election in Moncton is a largely quiet affair as the last two critical weeks of decision making and voter's choice unfold.

It would have to be a complete rout for Brian Murphy, one of the abler politicians to come along in Moncton's rich political history, to lose the Rideout-Bradshaw federal seat of historic Liberaldom.

Liberal Candidate Brian Murphy has an interesting campaign Blog, well done too, and of course a political campaign web site.

But looking nationally, I am drawn to an analysis published Sunday by our own national affairs Blogger Au Contraire writing from his precarious perch in Quebec, where politics is more than a blood sport; its a hockey team.

A virtual hockey team's passion with political theocracy mixed in and fueled by nationalistic religious fervour. Politics in Quebec is but one step below locked and loaded status, but there's still time for guns, again, there.

Quebec federal and provincial politics with Canada brings a whole new meaning to the religious terminology condition description of Protestant religious rapture called, speaking-in-tongues.

Au Contraire, him/herself, a veteran of many political campaigns and national campaign insider bus and plane tours in search of political nirvana captures what is wrong with the Liberals nationally, with his last line in Sunday's post. His summation is that Jean Chretien is looking forward to the dismissal of the Martin Liberal government on election night 2006.

Martin's failed Prime Minister-ship will be his vanity license plate in a terminal car crash called the Liberal Party's post-Chretien leadership.

While this may seem a strange affection by a former PM, it is an interesting condition of the body politic that politicians and the groupies who serve them will not only eat their own young with garnish, they will knaw off their own able limbs in revenge of the nasties of political life.

Passions run deep in politics and more resemble a dysfunctional family of bullies than policy and procedure brilliance, at times.

I still have a secret handshake and shared decoder ring relationship with a few of the ancien Party survivors with whom I have experienced a political purge for picking a leadership rival based on some temporary democratic principal that seemed important and timely at the time. Only to lose and be banished. It's called the Political Leadership Guillotine Program.

I was reminded of this condition of medieval and Machiavellian political expediency policy when a politician that I was once in service of for his political career communications, held me riveted as he explained that any successful leader was as concerned about the leader coming behind him as replacement, as he was with the strength of the politician he sought to replace when he first decided to run.

His lesson was that a politician's legacy is largely enhanced or diminished by the actions of the one coming behind. History be the judge, but first you have to prime the pump of historical fact and leadership fiction. The best position, he explained to me in my awe, was that the person coming to fill the successful politician's shoes should be less able and somewhat less successful as a preference.

It was then that I knew I was a failed potential in politics. I am hopelessly addicted to excellence and positive enhancement of a community. I never got the "screw them all" part right.

It is through these eyes that I view Au Contraire's analysis and the approaching debacle that may be unfolding toward January 23, in Canada, of 2006.

In politics, as in sex and comedy, the core truth is that timing is everything. It is not for nothing that a political party is first an organ of power, pursuit, and pleasure as a policy creation.

The play out on political succession of a hated adherent and leadership rival is something that Canadians have been watching as the luckless Martin, who is today's political Icarus flying to close to the sun of political service, is seeing unfold as he appears to this day, to be the wrong, but right person at the wrong, but right time, regardless of the rightness of his economic policies.
Cruelly, his pursuit of leadership, again as Au Contraire as so well documented in her/his Blog, has caused him to turn his back on his own stewardship of state as Finance Minister, to the point where his former business class cheerleaders outside of the game of politics no longer recognize the formidable man they once appreciated, respected, and were prepared to follow. Somehow, his avarice of recognition as being PM has diminished this once competent man to be a lackey of a desperate party and a more desperate Stephen Harper, who simply has to keep breathing to be more.

Don't let your daughters or sons grow up to be cowboys, or want to be politicians is the lesson.

We are awash in wealth and fiscal economic balance even as we are sloppy about being competitive against countries that put their sick pensioners on rafts on rivers to represent final health care and pension solutions. Regardless, our health care card still works, even if the waiting line river is a killer wait, on some days.

Strange, but true. The only people who envy Canada and Canadians, are those living outside of the country. It appears to be so, because we cannot bring ourselves to accept that we have a prize of citizenship here that should not be brought down by heedless expenditures in Quebec. An amount that in percentage of the total Federal Government budget is less than one quarter of point one percent of the total expenditures on any given year. It is to weep.

From (Jan. 08-2006) weekend polls and the smartme-media pundits, who never met a person falling that they can't attempt to push lower; Martin as PM and Liberal leader is so 1995, and is to be banished to retirement.

Au Contraire postulates and it would appear accurately so, that Liberal PM Martin is down for the count and that the happiest person in Canada on January 23 will be the tough street fighter and political alley everyman Jean Chretien. Like a Shakespearian play of tragic hero fate and fortune from a single decision of pride, it does look post-Gomery and pre-Canada-Quebec separation that Chretien left a hidden political stiletto in Martin's political power vein.

Martin as Prime Minister has slowly bled out his promise and premise larely in front of the media glare and Canadians bewilderment.

Politics is cruel. It is the DNA of democracy, but it the Canadian people who will pay the price for this dance of death as we have a minority somebody with a unified Quebec in ascendancy. Added to the ascent of unified Bloc Quebec is a Western-based, economic right wing mentality in mutual ascent that appear to want to remake Canada in the graven image of Bush and Cheney social economics. More core capitalism for the well-off and less social conscience about the struggling.

And that has worked so well for them.

It's a long way from Moncton to Montreal and the bordello on the Rideau for political aspirations, and with effective local representation we can still have a viable local economy, even economic growth. over the next 18-24 months of minority government. There will be no room for Dieppe and Moncton to play out acting independent of one another with Riverview hoping someone else fights it's own economic price tag.

The new MP will have to be the community's spark plug, political coach and enforcer of decorum among competing municipal interests. Or beg for amalgmation of Moncton with everything within 25 miles of the urban center.

Tomorrow's Moncton riding MP is going to have to be a no nonsense, get-on-board, and work together conciliator who leads the locals, since the Federals are going to be otherwise pre-occupied.

Your going to hear a lot about Atlantic Canada finally standing on its own two feet. This ghetto-ization of Atlantic Canada by the wealthy-for-Now, Rest-of-Canada will be code words for cutting off the economic transfer lines. The new Ottawa will smile as it says tough economic love will build our character in the future. There will be Atlantic Demonetization as we are the cripples of the tribe, by not keeping up.

Who ever wins in Moncton on January 23 th , 2006 will have to lead all of Metropolitan Moncton in concentrating on local issues and local economic development strategies, because nationally, we are going to have our very own Serbia with ethnic language cleansing in Canada.

The super Reformers ascendant in Rest-Of-Canada and rabid separatists fueled by their own vision of a daily negotiated Canada policy that will very much resemble the DNA of the Liberal Sponsorship program; pay us off with special financial status and we will let your government live another day and another Federal dollar to Quebec, or else.

While this ransoming of purpose and policy goes into ascent, we will have the true Conservative vision of less government intervention in economics, political programs and social programs all the time and the encouragement of a society that banks on the richer getting the access to, and the privilege of programs. This, while we without access will user fee expend ourselves into Louisiana status, in the Maritime Provinces.

We have flirted precariously previously in Canada, with pitting Western alienation over Canada's failed federalist programs in Canada West against the interests of an avaricious Quebec still thirsty after all these years to snatch self rule omnipotence from shared cooperative powers; before. But never as uniquely unified in our division as this hapless election is going to render us this coming day.

As for the disjointed Metro Moncton and uber metro of Regional Halifax, along with a energy rich urban St John's Newfoundland, these three urban economic outposts in Atlantic Canada are going to have to drop the gloves.

Not dropping the gloves against one another as they do today, but with a dismissive rest-of- Canada who are going to balkanize in a manner that one day will replace the term balkanize-now a term of broken up minor states from the Hapsburg era; and become a new term for political and cultural/language division ism called, I am predicting, canadianism with a small c.

Small c canadianism as in hopelessly divided over everything with power to the Provinces to try and tame their restive, local advantage driven populations.

While the global world deals with a rising China, a disruptive religious war in the Middle East pitting the majority muslim et al religions against white race protestant militants in North America, and while major venture capital investment is chasing an alternative energy future on Sun-LNG Gas-Wind and Water supplied Hydrogen; Canada is re-fighting the Battle of the Plains of Abraham with a prairie populist navy. Calgary, the new Britain.

There is a political tragedy brewing and it started when some internal Liberals laughed behind their back of hands at the first candidacy of the elocution challenged Chretien. Tomorrow's election debacle started with a series of pretty boys of politics from Turner on that built a fissure in the federal Liberal Party that is revenge-playing out across Canada today.

From Chretien's first leadership attempt, everyone chose leadership sides and suffered the consequences of being temporally on the "out " or "in" of modern political party. Internally, in New Brunswick and Atlantic Canada, the various campaign chairs are known as Turner era to Martin advocates or Chretien loyalists.

It is the rue of the day and of this election.

Moncton's own political dynasty of family Rideout as successful Liberal MP and potential Cabinet Member had his own future in Ottawa and working for the interests of Moncton, effectively truncated by his early, and some would argue, precocious choice of Turner for leader over the eventual dominate Chretien. George Rideout's political career potential never recovered and he knew the path of wrong horse choice in a federal Party leadership campaign and came home to the arranged political purgatory of a sitting judgeship.

The community lost an effective economic development leader and the judicial captured another failed political ambition from the Big House, in order to make case law, or not. If only judges could talk.

It was from this froth of ambition and political currency greed that the Chretien-Martin Country Wars 1984-2004 emerged nationally and even impacted on Moncton.

This personal vendetta of political gangmanship, just as it once consumed Quebec,( cynical Sponsorship Funding Scandal), now has festered broader and has consumed the once proud and effective Party that spawned it, and it is about to consume the Canadian federalist state dream.

Conservatives have a federalist dream, but their dream -so far as it has been expressed- involves dissolution of federal power to Provinces in a negotiated peace-in-our-times move that will see Atlantic Canada, become less rather than more, as far as an economic growth future goes.

It is not that separatist's won their vision of a divided Canada through brilliance and strategic execution. Rather, it was that the federalist state, weakened by regional jealousy and different economic value philosophy of what it means to be an independent Canadian state; threw the game.

And for the oldest of reasons, competing ambitions. Personal ambitions and political street gang warfare fanned by linguistic and cultural "differentisms" based on a willingness to not accept what is different, and value it, and work with it. Rather, everyone has gone for their political opportunity and in the process, I would argue, the consequence is that we are losing the dream of Canada.

The old Canada pre-2003, and what arguably once worked in keeping PQ separatists off point and prevalence appears to be unraveling, because somebody in a dismissive understanding of what works in the real Quebec, decided to throw money indiscriminately at a problem in the most cynical of manner possible.

The Chretien Liberal Sponsorship campaign is the closest thing I have seen to the meaning of Marie Antoinette's famous dismissive of "Let then eat cake".

In distaste on January 23, English Canada will vote more against something rather than examining what they should be voting for in terms of who will lead them effectively against the economic ruptures that are changing the World we have lived in peacefully recently, and is now a perilous place for complacent and comfortable Canadians.

As Henry Kissinger once sagely suggested as an example of Nixon's paranoia thinking about his and the US enemies of State ( amended here to fit my circumstance), "Canadians, they really do have enemies".

The tragedy is that the animosity of Chretien and former political-pretty boys Turner-Martin for each other and their failed ambitions will have fiddled while the enemies of Canada domestically and now those with foreign zip codes or no zip codes at all in their caves of convenience will continue their burning actions to marginalize an increasingly decentralized and weakened Canada.

Shame, about that 21 th century belonging to Canada comment of former Liberal PM Wilfred Laurier.

We are dangerously close to becoming a country whose future is behind it.

New Brunswick: Questions in Search of Answers

Yesterday I wrote about GrowSmart Maine and excerpted a portion of the address by a Brooking Institute academic's view on creating new economic development initiatives.

Later I found, deep in the end of a introductory speech, a series of questions that Mainers are going to be asking, and asked, over this winter as part of the study. These same questions need to be asked and answered by all New Brunswickers.

We need a new visioning process for New Brunswick. Here are some of the best questions requiring an answer of any sitting or intended Premier as leader of New Brunswick. Answer in detail, please and no punditry or vague phrases of political rhetoric.

We need a plan. A radical rethinking of this Province, about this Province.

If you read this and have a suggestion or addition, please take advantage of the in put section for comments at the bottom and share them with the rest of the readers.

Questions that we need to ask in New Brunswick and answer.

1. Does New Brunswick have the right demographics for a competitive future?

• Development Issue: How does New Brunswick build a qualified workforce as one of the oldest Province's in Confederation?
• How to develop New Brunswick, when it is also one of the whitest Province's in Canada with limited and almost invisible immigration or other cultures beyond the historic European origin of New Brunswick, which still clings to an United Empire Loyalist State of Mind. ?

2. What is the changing structure of the New Brunswick's economy?

• Development Issue: What clusters and sectors is New Brunswick currently good in?
• What can be preserved?
• What can be expanded?
• What, in short, are New Brunswick's niches in the global economy?

3. How does New Brunswick organize to compete?

• Development Issue: How do you preserve what is best about New Brunswick's eight cities and two dozen plus towns – their connection to their citizens – while adapting to broader demographic, market and development patterns that clearly transcend parochial borders?
• New Brunswick has a national success model in Moncton's recent economic revival with Dieppe and Riverview as effective partners, only to find themselves needless squabbling now over housekeeping matters, while other unified communities look on in amazement and, in some case amusement?

4. Why is sprawl and decentralization happening across New Brunswick?

• Development Issue: How much of New Brunswick's sprawl toward LSD's and rural road development for housing is prompted by the deep tax disparities between service centers, urban cores and outlying areas?
• What are those tax disparities, why do they exist, what can be done about them?
• How much is sprawl a natural result of the intersection between housing market dynamics, local government and property tax reliance?
• Moncton has made noises about getting revenue transfer for the use of urban facilities by non-residents from nearby LSD's and municipalities that are not paying their fair share to Moncton's costs, How valid and what impact?

5. In New Brunswick today and tomorrow with energy costs on the rise, what costs does sprawl impose on government and communities?

• Development Issues: What’s the price tag associated with low density development in new school construction, new school transportation, new facilities and infrastructure and the higher costs of delivering basic services like fire, police and emergency medical?

6. What costs does sprawl impose on families, particularly on low wage earners?

• Development Issue: How do working families forced to live 20 miles away from town centers balance housing and transportation costs, particularly given rising gas prices?

7. For New Brunswick future economic growth, what are the benefits of reinvestment?

• Development Issue: How much available land exists in service centers along riverfronts and central business districts?
• What is the inventory of vacant land and historic buildings and abandoned use or surplus buildings in and outside core areas that can be reclaimed for productive use?

8. What is the Province of New Brunswick doing, positively or negatively, to promote high road economic growth and access to higher education?

• Development Issue: What is the Province doing to advance the revitalization of urban core areas as well as smarter, more sustainable development patterns far from the urban core?
• What is the Province doing to enable working families to live closer to good schools and quality jobs?
• Are the rules of the development game in New Brunswick – state tax, spending, governance, regulatory and administrative policies – tilted toward sprawl?

9. What can the Province do to make structural, systemic change to existing policies to promote competitive, sustainable and inclusive growth?

• Development Issue: What can New Brunswick learn from other Provinces and New England States about education reform, tax reform, community revitalization, brownfield remediation, riverfront restoration, urban land reclamation?
• What can New Brunswick learn from Europe—Ireland, Finland, England—about these same issues?

10. How does the Province mobilize itself and local community leadership to affect change?

• Development Issue: How do you build a majoritarian coalition among disparate constituencies?
• How do you convert a theoretical coalition into a practical one?
• How do you give political leaders the cover needed to do the right thing, to make the big bets?
• How do you transcend the culture of independence and individualism to do what is right for the collective New Brunswick?

Those are all solid, thoughtful questions that the good people of Maine are asking this winter and I would suggest that we should have an observer there and see what can be learned about the developmental process and contemplation.

I have taken the time to amend these for New Brunswick and they could be applied to Moncton-Dieppe and Fredericton as well as Saint John, and for the northern communities of Miramichi and Bathurst-Campbellton who are facing the loss of forestry industry on top of the erosion of mining activity.

Every community has a future coming, ready or not. We in New Brunswick are anxious because love him or hate him or simply ignore him, Premier Lord has had a profound impact on the Province and its sense of confidence.

If you accept the rule by numbers and look around at the residential building numbers that appear grotesque as people burden themselves with mortgage debt and Make Over Renovation luxury, while few if any communities in New Brunswick can point to a new wealth generating business investment in their communities.

By wealth generation, I mean taking water and making it into beer for export to another market to bring money in, or an energy fuel production plant that removes a foreign dependency and cost that is not re-arranging existing money, or further draining provincial borrowing capacity to renovate a nuclear plant; I'm talking new money.

We need to examine our decisions today to allow LSD's to proliferate or worse for more and more students to be bedded in more distant homes from schools so that more buses built in Ontario and increasingly managed by companies from away are used to haul their darling little carcasses to school each day. Where is it writ that because you can live 20 miles from a school that taxpayers have to pay to compensate your family decision to not live near a school or hospital.

New Brunswick has in the last ten years lost its former super starts of economic development.

NBTel is now a shell company in a regional collective owned by a US international carrier investment group that effectively owns and controls our Aliant phone service through a majority holding of Bell Canada, which is a brand of Canadian CRTC compliance convenience of stock ownership for US investors.

Where there was once a company called NBTel that innovated and was a world class communications process and product developer that gave New Brunswick a seat at any global table. It is no more. Premier Lord, unlike McKenna does not have NBTel or any other technological leader that is domestically controlled in New Brunswick ownership to call to the table for a collaborative sales call with strategic home advantage over other State and Provinces as we once did.

Then there is the raped and pillaged NB Power of 2006.

A collective four play shadow of its once captive market power that has for right or wrong reasons been irreversibly de-constructed as an economic lever of sustainable economic development for New Brunswick's industrial strategies and advantages by a number of enemies of a Made in New Brunswick economic development strategy including globalism or some other ism that I fail to understand.

What I do understand is that the tool that Richard Hatfield and Louis Robichaud and to some extent, McKenna was able to wield with Made-in-New Brunswick energy costs and strategic advantage to lure industry are no more. We are in a regionalized market for energy, dependent on foreign crude oil supply and price points as a result of the failed, if not always doomed purchase of orimulsion that is now a nuclear gamble of immense proportion.

Even the structuring of costs, once something that was used in the poker games of getting a deal on a new pulp mill or some other major consumer of industrial power is unavailable to us in New Brunswick.

True the new lean and possibly mean NB Power, is still servicing a captive market and unable to sell much of the power it produces at the wrong time of the year when nature is air conditioning Boston and New York office towers, as an asset it has limited, if any strategic role in economic development beyond not screwing up any more and further impacting consumer costs.

So what these questions are meant to do, is focus New Brunswick on finding an answer. We need to dialogue. We need every idea and a discussion and we probably do not have the millions that Maine will spend to get their vision in place.

Speaking of vision and the pursuit of same. Here is how GrowSmart Maine, gotta love that great conceptual name, wrapped up their visioning announcement. It is as relevant to New Brunswick's future as it is to Maine's. Note the italics and quotations as it is a direct lift.

Grow Smart's Statement of Launch Announcement Conclusion

"I believe that this state ( Maine ), can grow differently.

I believe you have one of the best shots in the country to create competitive cities and suburbs that create and nurture strong, resilient, adaptive economies.

To develop sustainable cities and suburbs that promote accessible transport, residential and employment density, and energy efficiency.

To build inclusive cities and suburbs that grow, attract, and retain the middle class and give all individuals, irrespective of race, ethnicity or class, access to quality jobs and good schools.

To fashion livable cities and suburbs that promote and preserve quality neighborhood design, abundant open spaces, irreplaceable environmental treasures, and distinctive public spaces as a foundation of competitiveness, sustainability and inclusivity.

But this vision will not just happen.

You will need to fight for it with focus and discipline and, most importantly, as part of new majoritarian political coalitions that demand supportive state and federal policies.

Those of you who believe in a competitive and sustainable vision are the majority.

Now you need to act, organize, and govern like one."

Local Moncton Web is going to monitor this economic visioning process in Maine, maybe even take a trip across the border and listen and learn and report back to these Blog readers. If there is no appetite for this in New Brunswick, then perhaps Metro Moncton from Alma to Rexton, better take a new look at how and where we are growing and where our essential services are going to come from.

Ever notice that the Southeast Hospital Corporation reaches from Alma to Rexton to Port Elgin to Petitcodiac and has for over ten years. Note that the new 911 and police zone does the same. There's a lesson in this.

If not we will default to a future instead of growing one.

GrowSmart Maine- A Model for New Brunswick To Follow

Local Moncton Web is meant to speak to what is important in Metro Moncton and beyond across New Brunswick. Today, I want to talk about Maine, just over the border. So alike and so different.

I was in Maine recently and spent a Sunday afternoon and evening in Freeport, Maine, which is immediately recognizable as a shopping mecca for consumers in New England and even Atlantic Canada.

The Freeport streets in pre-Christmas apparel, were awash with shoppers including on late Sunday evening, when walking by the LL Bean window, the mass of shoppers looked like Saturday at Trinity Power Center here in Moncton.

The Church of Shopping is definitely bringing in the congregation in Maine. No hand wringing there over Sunday shopping. The LL Bean catalogue center was on 24/7 shifts and flotillas of UPS and FED-EX trucks were convoying out onto I 95 south ,the whole 30 hours of time that I was there.

While there, I talked with a native Maine resident who sees the social ills and the economic problems as Maine problems too, despite the Disneyland on Shopping Carts aspect of Freeport and Kittery. He also sees in his State growing loss of pulp and paper plants, and the biggie, reduced military spending along the frantic tourism cache coastline. Businesses are losing out.

Even LL Bean and its supplier chains are feeling the Made in China pinch.

But Maine, facing the same kind of urban to rural migration to avoid taxes migration that New Brunswick is experiencing, despite Moncton's effort at mounting an urban challenge, is doing something about it. Big time. And we should pay strict attention.

GrowSmart Maine is the best public policy debate title I have ever come across. It gets to the heart of the matter very quickly.

Their focus is on creating a sustainable economy and they are focusing on urban sprawl as not only a cost factor and demographic, but as a threat and obstacle to creating a competitive State economy. When is the last time you heard someone with some panache and sound reasoning talking about this in New Brunswick.

The famous Brookings Institute is working with a local State group that resembles the kind of teaming of private companies and public purses for development agencies that we have used successfully in the past in New Brunswick to refocus our efforts.

Here's is an excerpt from an October 2005 launch speech by Bruce Katz, the planning representation head of Brooking Institute, one of America's premier leading think tanks.

In leading up to the quote excerpted here, was this statement:

Today I want to give you some very early impressions from our initial travels … as well a sense of how Brookings thinks about growth and prosperity and sustainability.

These are challenging times to govern in Maine … not because of any immediate crisis or controversy but because of profound changes in our society.

Broad market forces—globalization, technological innovation, standardization—are restructuring the US economy, changing what we do, how we do it, and where we do it.

He goes on to identify the three rules of economic development principles that they are basing their work on GrowSmart Maine and they are a perfect fit for what we should be obsessed about in New Brunswick. Read his full address by clicking GrowSmart Main Launch, here

Bruce Katz Remarks: Today, I am going to discuss three new rules of economic success.

Rule Number One: What You Know Affects What You Earn as a Family and Whether You Prosper as a Community. In our changing economy, higher and higher levels of education are the keys to prosperity for families and competitiveness for regions

Rule Number Two: How You Grow Physically Affects How You Grow Economically. Density and compact development and quality of place matter in the knowledge economy.

Rule Number Three: How You Govern Affects How You Grow. In a changing economy, regional cohesion and less governmental fragmentation are hallmarks of smart governance.

Ask yourself this.

Is anyone but Alec Bruce , David Campbell's authoritative It's The Economy, Stupid blog commentary and Bill Belliveau in their blogs; talking about what we really need to know about in this election.

Can you identify a candidate that is talking candidly about the real elements of economic growth and development in this Federal Election of 2005 ?

Who in the Province is speaking out for New Brunswick ? Who and I repeat who is speaking out for New Brunswick's future ?

The winds of change are blowing out mines and pulp mills faster than we can bail them out and even if the markets improve, the deconstruction of NB Power means that our power rates as well as our limited supply of wood pulp availability to source to mills, means that we are going to lose this economic engine in this decade.

Who is speaking out for New Brunswick ?

Where is our GrowSmart New Brunswick strategy ?

Where and who is leading ? Before you vote, ask