Major developments in American politics and society always provoke some combination of consternation, envy, imitation, rejection, or righteous indignation north of the border. This fact of Canadian life pre-dates Confederation; it even pre-dates the American Revolution.

When the American revolutionaries exported their cause to Quebec in the invasion of 1775, they met with overwhelming rejection. In later decades—during and following the War of 1812—American republicanism provoked a Loyalist response from Anglophones in British North America. But the Americans also inspired the liberal cause among the colonists to the north. American ideas played a key role in stimulating English and French-Canadian demands for responsible government that issued in the rebellions of 1837-38. Similarly, the American Civil War reinforced the drive of British North Americans toward the establishment of their own federal union and the trans-continental expansion of the Canadian state. Roosevelt’s New Deal and the subsequent emergence of the United States as a global superpower transformed Canadian political and societal views and Canada’s outlook on the world.

Although the long-term effects are, as yet, far from clear, two critical developments in the United States in 2008 are having, and will have, an enormous influence in Canada. The first, the election of Barack Obama as president of the United States, is closely linked with the second, the economic crash of 2008. Both will alter the preoccupations of Canadian scholars and public intellectuals.

Barack Obama’s decisive electoral victory—his redrawing of the U.S. electoral map—was lent a great assist by the collapse of financial institutions and the crash of the stock market during the pivotal weeks of the 2008 election campaign. His Republican adversary’s early insistence that the U.S. economy was fundamentally sound, followed by his uncertain, at times erratic behaviour when that position became untenable, convinced many independents that John McCain was a part of the problem not the solution.

Obama constructed an electoral coalition that differed significantly from Franklin Roosevelt’s New Deal coalition. He won a crushing majority of African-American voters (95 per cent), a significant majority of Latinos (66 per cent), and the support of 43 per cent of whites, concentrated in the Northeast, Midwest, and the Pacific Coast. Among these, he did very well with better-educated and wealthy voters. He garnered the support of 55 per cent of female voters, an increase in the customary Democratic advantage among women. It is a potentially unstable coalition should Obama’s economic strategy be unsuccessful.

But the lessons, or apparent lessons, of Obama’s victory could not fail to excite political actors and political scientists in Canada.

Could a similar political campaign work here? Could the Liberal Party, the obvious potential imitator of the Obama approach, win a majority of working-class voters, immigrants and their children, Francophones, urban females, and a sizeable portion of the votes of the economic elites? This would be the modified Canadian equivalent of the Obama coalition.

It is not difficult to see that such a coalition is essentially the one that was cobbled together by the Liberal Party before and during the reign of Pierre Elliott Trudeau. Reconstructing the Trudeau, or we can call it the Obama coalition, is the glittering prize on which Michael Ignatieff and his advisors feast their eyes. Assessing whether the Liberals are likely to pull it off is what political analysts need to weigh. Some will want to reduce this to an appraisal of the ability of the Liberal Party to use the new communications technology as effectively as the Obama team did to raise money and to bestow on their leader the glamour of a northern Obama. Perhaps mastering the arcane mysteries of Facebook and Twitter can point the way to the Holy Grail.

Other analysts will frame the question as one of leadership. A Barack Obama doesn’t come along all that often; neither does a Pierre Trudeau.

Still others, perhaps more fruitfully, will analyze the deadlock of the Canadian political system with its four parties entrenched in specific regions and cities and among important segments of particular social classes. Others will examine the underlying reasons for the inability of any single party to offer a vision and a program that can win the adherence of a large plurality of Canadian voters. It may even be remarked that what Obama hopes to achieve, particularly in the area of health care, was realized— and more—in Canada during the 1960s as a consequence of the strength of social democrats and liberals in this country. Could it be that Canada has already had its Obama moment?

What about the second great question of 2008, the economic crash? How will it reorder the Canadian intellectual agenda? How will Canadian scholars interpret the economic crisis, the nature of the global economic order that will follow it, and the choices for Canada over the next few decades?

The crash of 2008 has been widely recognized as the most severe global economic cataclysm since the crash of 1929 and the subsequent Great Depression. A compelling case can be made that the crash signifies the end of an economic epoch— the neo-liberal age of globalization and the American-centerd global economy. What lends weight to this thesis is both the nature of the system of finance whose collapse is at the centre of the global crisis and the crushing problems that face the United States, making the re-assertion of an American-centred global economy exceedingly improbable\

The proximate cause of the crash of 2008 was the bursting of the sub-prime housing bubble in the United States whose immediate consequences were the collapse of major financial institutions and the freezing of credit. The crash brought into play the vast and multi-layered problem of American indebtedness. The three peaks of the American debt mountain are as follows: the national debt, owed by the federal government, which totaled about U.S.$11 trillion and is set to climb much higher with the prospect of annual deficits in coming years of more than one trillion dollars; the swiftly increasing net indebtedness of Americans to the rest of the world, totaling trillions of dollars; and the indebtedness of individual Americans, amounting to about eleven trillion dollars, centered on the explosive use of credit cards.

A Barack Obama doesn’t come along all that often; neither does a Pierre Trudeau.

The U.S. national debt is financed in part by securities held by U.S. government accounts; among the most important are the Federal Employees Retirement Funds and the Federal Old-Age and Survivors Insurance Trust Fund. At the beginning of 2008, 55 per cent of the debt was held by the “public”, meaning those who purchased U.S. treasury bonds. Forty-five per cent of these “public” purchases were made by foreigners, two-thirds of that total by foreign central banks. By far the most important of the central banks in making these purchases were those of China and Japan. When to the central banks of China and Japan are added the other purchasers from these two countries, about 47 per cent of the purchases by foreigners is accounted for. In total, foreigners have been financing about 25 per cent of the gigantic U.S. national debt, a percentage that the Obama agenda could drive much higher.

Between them, the central banks of China and Japan hold over a trillion dollars worth of the U.S. securities used to finance the U.S. national debt They don’t buy them because they regard them as a good investment. Quite the contrary. They buy them to save the United States from the crippling consequences of its own internal weakness. This they do, not as an act of generosity, but to safeguard their vitally important export markets in the U.S. and to prevent an even more calamitous global economic collapse.

In the dizzying run up to the crash, the debt mountain, swollen by the lax regulatory environment and the gluttonous appetite of financiers, meant that Americans were enabled to live beyond their means. Now the time has come to pay the piper.

In an article in the spring of 2009, New York Times columnist Paul Krugman linked the crash of 2008 to the indebtedness that took off in the 1980s during the Reagan years: “…it was the explosion of debt over the previous quarter-century [prior to 2008] that made the U.S. economy so vulnerable. Overstretched borrowers were bound to start defaulting in large numbers once the housing bubble burst and unemployment began to rise.

“These defaults in turn wreaked havoc with a financial system that—also mainly thanks to Reagan-era deregulation— took on too much risk with too little capital.

“There’s plenty of blame to go around these days. But the prime villains behind the mess we’re in were Reagan and his circle of advisers—men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.”

Not only does the crisis of American indebtedness herald a lengthy global economic malaise, it points to a new configuration of economic power in the world in coming decades. In place of the U.S.-centered economy, the future global economy is likely to be multi-polar in character.

Other states that will play enhanced roles as power centres in the global economy include: China, India, Japan, the European Union, Russia, Brazil, Mexico, and South Africa. The new global economy will certainly not be one in which national autarchy will prevail. While the era of globalization to which we have been accustomed will be at an end; what is coming will be an economy in which trade, commerce, and investments, will tie countries and regions to one another. National economies and their linkages, however, are highly unlikely to adhere to a single set of norms. The rule book the U.S. managed to impose on much of the world is bound to be replaced by a myriad of rule books and norms.

Canadians will need to consider the choices they have in this volatile environment. It remains to be seen how much help they will receive from the nation’s scholars in making sense of those choices. There is not much reason for optimism on this score, but neither is the outlook entirely dark.

The large majority of Canadian academic economists, whether in departments of economics or in schools of business, have lashed themselves to the mast of neo-liberalism, whose nostrums did so much to precipitate the storm that is wracking the global economy. In the aftermath of the crash, they show little sign that they are not determined to go down with the neo-liberal ship.

Canadians are also not likely to receive much insight from the nation’s social scientists. While they have done useful work in other areas, for a couple of decades they have paid little attention to questions of Canadian economic strategy. The great tradition of Canadian political economy that contributed so much to public intellectual discourse has been largely abandoned. In their own way, social scientists have accepted the basic direction of the economy as a settled question, and they have dealt with other issues.

When Sir John A. Macdonald unveiled his high-tariff National Policy in the late 1870s, he was frustrated by the fact that the accepted wisdom of the day among economic thinkers ran counter to the direction he believed Canada needed to take. Pro-free trade British economic orthodoxy, as Macdonald complained in a seminal speech in 1878, suited the globally dominant British but was of little value to Canadians. After they won the Battle of Waterloo in 1815, Sir John A. said, the British designed an economic order that reinforced their position of power, and they pulled up the ladder so that no one else could follow them. British-style free trade, Macdonald insisted, was designed to keep British industry on top and to prevent the emergence of competitors. For Canada’s infant industries to thrive, they needed protection, according to the great champion of 19th century Canadian conservatism. Whatever the limitations of the National Policy, and they were considerable, Macdonald was giving voice to a home-grown conception of political economy, during a time when the global economy was in the midst of a great depression, and a basic economic transition.

Following the crash of 2008, Canadians find themselves on a voyage to a new global economy, just as they did in the closing decades of the 19th century.

I am hopeful that necessity will provoke new thinking, just as it has at critical moments in our past. Some of this thinking may even emerge from the cloisters of academe, although for that to happen there will have to be a very frank debate about why our academics have been AWOL for so long when it comes to considering questions of economic strategy. AM

A professor of political science at York University, James Laxer is the author of Beyond the Bubble: Imagining a New Canadian Economy, to be published in November by Between-the-Lines Publishing.