Is Canada an Imperialist State?


Has Canada become an imperialist state, as some on the Left argue?  On the surface, a case can be made.  Why did Canada participate in the kidnapping and expulsion of Haiti’s elected head of state, Jean-Bertrand Aristide?  Why are Canadian troops fighting the insurgency in Afghanistan while supporting a regime dominated by feudal warlords?  Is it not true that Canadian mining companies are scouring the world from Guatemala and Colombia in Latin America to Indonesia and Mongolia in Asia, exploring and tearing up the earth and taking full advantage of cheap labour in these countries?  And is it not also true that in recent years Canada has become a large exporter of capital — some say it exports more capital than it imports — a sharp reversal from its former days as a dependency of the U.S.?

All this and more is true.  By all appearances, Canada is now one of the world’s core capitalist countries.  It has been accorded that recognition by being accepted as a member of G-7, the club of the seven wealthiest industrial countries in the world.

No Longer a U.S. Dependency?

Since the early 1970s, when the new political-economy movement first dubbed Canada as the world’s richest dependency, the Canadian economy, and more specifically Canadian capitalism, has matured in some significant ways.  At that time, foreign corporations (mainly U.S.) controlled 37 per cent of all non-financial corporations including nearly 60 per cent of all manufacturing and 70 per cent of mining.  Some of us predicted that foreign control was so extensive that, except for crown corporations, it would soon cover just about all industrial sectors.  But this did not happen — quite the reverse.  Over the next decade and a half, Canadian capitalists had repatriated significant amounts of these assets — so much so that, by 1986, foreign control of corporate assets in non-financial industries had fallen to 21 per cent; manufacturing to 44 per cent; and mining to 31 per cent.  By then, homegrown Canadian capitalists had come to dominate lists of the largest 25 and 100 corporations.

Moreover, Canada’s extreme dependence on natural resources and commodity exports had also declined — from 71 per cent of total exports in 1971 to 53 per cent in 1986 and 45 per cent in 1999 — still far greater than in any other advanced industrial country, but at least moving away from its perennial role of “hewer of wood and drawer of water” for the global marketplace.  Finally, in these years Canada became a more visible actor in world politics, taking up a more active role in the United Nations and the Commonwealth group of nations.  Among its most important decisions were its refusal to support the U.S. blockade of Cuba; its decision to be among the first to recognize the People’s Republic of China; its adoption of a leadership role as peace-keeper in international conflicts; and its leading role in the Commonwealth supporting sanctions against South Africa.

From the Mid-1980s to the New Century

The picture in the new century is complex.  Total foreign control of Canadian industry, which in 1986 had fallen back to 21 per cent (from its 1972 high of 37 per cent), had by 2003 climbed back to 29 per cent, a level last seen during the mid-sixties.  Very substantial Canadian companies like MacMillan Bloedel, Air Canada, Petro-Canada, CN, Anderson Exploration, Gulf Canada Resources and Tarragon Oil and Gas came under foreign control in this period.  In 2003, of the top-500 companies in Canada, 37 per cent were still foreign-owned by 2003 — less than in previous years, but far beyond levels experienced in Europe or anywhere else.

More recently still, foreign takeovers are announced at a fast and furious pace, no doubt nudging foreign control further back toward its historical peak.  In 2005-06 alone, giant companies like Molson, Dofasco, CP Ships, Fairmont Hotels (including the Chateau Laurier, the Banff Springs, the Royal York and another 85 hotels worldwide), Falconbridge, Terasen (the seventh-largest company in B.C.), the Hudson’s Bay Company, Royal LePage and Domtar all fell under foreign control.  As this is being written, INCO shareholders are debating whether to accept a purchase offer from the U.S. or another from Brazil.

As far as trade is concerned, Canada is once again officially a hewer of wood and drawer of water.  Well over half our total merchandise exports consist of natural resources and bulk industrial materials.  Less than half consist of higher-value products like machinery and equipment, automotive products and consumer goods.  And the deficit in high-technology trade appears to be as large as ever, no doubt a reflection of the fact that Canadian investment on research and development is, relative to GDP, only half of that in the U.S., Germany, Japan and Sweden.

One measure of Canada’s current place in the hierarchy of nations is the number of Canadian companies — thirteen in all — found in Fortune magazine’s 2006 compilation of the 500 largest global corporations.  This ranks Canada in ninth place, just ahead of South Korea and Switzerland (twelve companies each) and behind the Netherlands (fourteen companies).  China, with twenty, is ranked seventh.  The U.S. is ranked first, of course, with 170 companies, followed by Japan (seventy), France (38), Germany (35) and Britain (28).

Interpreting the Seventies Interlude

Looking back today, the dramatic movement towards greater independence seems to be stalled.  Upon investigation, it turns out that the slow-down of the U.S. corporate takeover in the seventies and early eighties initially had little or nothing to do with the recovered strength of Canadian capitalists.  The massive rush of U.S. foreign direct investment (FDI) into Canada in the fifties and sixties was in fact only the first wave of a more general, U.S.-led internationalization of capital that would, in the seventies and eighties, overtake other capitalist countries — especially Europe — and engulf them, too, in the American Empire.  Canada, being nearby — without a language barrier, with a large market for American-made consumer goods and enormously rich in resources needed by American industry and the American military build-up — was simply the easiest target.  Once Europe was fully recovered from the destruction of WWII and had overcome its fragmentation through the formation of the European Common Market, U.S. FDI shifted there dramatically.  So, while in 1960 over a third of all U.S. FDI worldwide was sent to Canada, by 1981 it had fallen to barely a fifth — whereas Europe’s share more than doubled, from twenty per cent to 42 per cent.

There was indeed a period of active economic repatriation, as well.  It began in the Trudeau era, which included the establishment in 1971 of the Canadian Development Corporation to encourage Canadian ownership of business enterprises; the monitoring of foreign investment through the 1974 creation of the Foreign Investment Review Agency; the establishment of Petro-Canada; and the 1981 National Energy Program to promote Canadianization of the natural-gas and oil sectors.  Provincial governments played a role, too.  For example, Saskatchewan engineered the takeover of American-owned potash mines.

Alongside this burst of nationalist legislation and continuing long after it had run its course has been massive state subsidization of industrial corporations, among which Canadian-owned entities like Bombardier were prominent.  All this government-led action, with Canadian capital moving into the economic spaces opened up for it — especially in the energy field — made a serious dent in foreign control of the economy.

Around the same time, a new wave of mergers, reorganizations and takeovers of giant Canadian companies by other Canadian companies supported by capital investment conglomerates like Brascan, Power Corporation and Canadian Pacific Investments, further strengthened Canadian capital.  These conglomerates also helped large-scale purchases by Canadian shareholders of American holdings in some big corporations like Bell Canada, Inco, Alcan and Northern Telecom.

Finally, taking advantage of corporate America’s temporary neglect of opportunities here, Canadian entrepreneurs moved hastily into new industries like information technology.

In other words, by the mid-1980s, there were many signs that Canada had finally outgrown its status as a dependency on the U.S. and had graduated from its semi-peripheral position among the capitalist nations of the world to that of a core capitalist state.

As a result, some on the Canadian Left began to suggest that Canada had finally broken out of the path of dependence.  They argued that Canadian capitalists were moving rapidly towards full control of the means of production; that in its structure Canada was indistinguishable from other capitalist states; and, finally, that Canada, in its aggressive economic expansion off-shore, had become a typically imperialist state, exploiting the world’s cheapest labour and ripping off their resources.

A More Ambitious Canadian Capitalist Class

There is no doubt that Canadian capitalists, whose mergers and consolidations at home and successful forays abroad — especially into the United States — gained a new confidence that they could compete with Americans on equal terms.  Particularly since the passage of the Canada-U.S. Free Trade Agreement, Canadian multinationals have been actively expanding into the U.S. and acquiring U.S. properties (and some European ones, too), although with smaller transactions.  This is all part of a massive merger movement that has engulfed the entire capitalist world for the better part of a decade.

Whereas in earlier periods they were the champions of protective tariffs to curb foreign competition in the domestic market and stood front-and-centre against any movement towards free trade with the Americans, Canadian capitalists were the number-one backers of the Canada-U.S. Free Trade Agreement negotiated by Brian Mulroney in 1987.

The fact that managers of American branch plants and subsidiaries were by now prominent members of the Canadian Manufacturers Association and the Business Council on National Issues (now the Canadian Council of Chief Executives) is only a partial explanation of this historical shift.

Fundamentally, Canadian multinational corporations have developed ambitions far exceeding what could be achieved within the boundaries of this country.  They see themselves as players on the global scene and, in particular, players on the North American scene.  They determined that what they needed above all else was secure access to U.S. markets, whether by way of exports, or, more reliably, by buying up businesses and properties and locating their own plants, banks and other operations on American soil.  They applied the same strategy elsewhere, especially in the European Union.

Not surprisingly, then, Canadian FDI has now reached sizable proportions — over $400 billion per year, about two-and-a-half times higher than a decade earlier.  Canada ranks among the largest foreign investors in the world in terms of the proportion of GDP devoted to foreign direct investment.  Even adjusting for the fact that this investment includes within it outflows by U.S. branch plants and subsidiaries, this is still an impressive record.

Does this clinch the argument that Canada must now be seen as an imperialist state?

It does so only if it can be further shown that Canadian investment in the U.S. and Europe constitutes acts of imperialist aggression — for well over three quarters of that impressive total capital outflow is invested in the advanced capitalist world, about half in the U.S. and a quarter in Europe.  It’s true that Canadian investment in under-developed countries has also been rising in recent years, but its share of Canadian investment abroad is still smaller today than what it was in the years prior to WWII.  What’s more, Canadian trade with underdeveloped countries is very small by inter-national standards, so whatever “unequal exchange” occurs in the trade between Canada and “Third World” peoples contributes very little to global inequality.

Of course, this does not mean that we need not be concerned with Canadian mining companies ripping up the earth in Asia, Latin America and Africa, or with Canadian manufacturers contracting out work to Asian sweatshops.  For example, faced with increased Aboriginal land claims and with base-metal reserves in decline, Canadian mining companies have been particularly active in shifting their investments off shore.  Canadian capitalists are no different than capitalists anywhere else: They roam the world to find the best conditions for maximizing their profits.  Where those conditions are more favourable abroad than at home, they locate abroad when they have the financial and administrative capacity to do so.

Some Conclusions

The degree of Canada’s integration with the U.S. remains unique in the world.  Structurally, Canada is a part of the U.S. economy.  Take export dependency, for instance.  The U.S. accounts for as much as 85 per cent of Canadian exports.  About 28 per cent of GDP depends on sales to the U.S. — about double what it was in 1970.  (This percentage, calculated from official trade statistics somewhat exaggerates the degree of dependency.  They measure gross exports which includes the import content in these exports, whereas GDP measures the value of goods and services created in Canada.)  The softwood-lumber and beef-cattle fiascos show how dependent are Canadian workers, producers and communities on decisions made in the U.S. Congress.

As regards both capital flows and trade, this is a continent of seamless accumulation.  It’s true that European countries, too, find themselves “more tightly penetrated, integrated and dependent on the American Empire,” to borrow from the work of Leo Panitch and Sam Gindin.  But in this respect, if Canada is beginning to resemble some European states, as some critics of Canadian dependency have suggested, it is not primarily because Canada is being transformed, but because these states are being “Canadianized.”

Even if it were true that Canadian investment in the U.S. exceeds American investment in Canada — a comparison made regularly in the Globe & Mail and echoed by some on the Left as evidence that the economic relationship between our two countries has been transformed — we have to ask what significance it has.  And how significant is it that the value of U.S. stocks owned by Canadian investors exceeds the value of Canadian stock owned by American investors? For, taken together, the stock of U.S. capital owned by Canadians is miniscule relative to the total stock of American capital, giving Canadian wealth holders little or likely no influence whatever in the American economy — whereas U.S. capitalists still possess an enormous presence in Canada, controlling a majority or a significant minority of the assets in a good three-dozen Canadian industries.  By comparison, not a single industry in the U.S. is majority-owned by foreign capital, let alone by Canadian capital.

To boot, some of the numbers thrown around to show that Canada is no longer dependent on the U.S. need to be scrutinized more carefully.  For example, FDI figures from Statistics Canada supposedly show that in most years since 1970 U.S. direct investment in Canada has been falling dramatically.  But these numbers are misleading, since the balance-of-payments accounts from which they are drawn do not count as part of U.S. direct investment the reinvestment of profits earned by U.S. subsidiaries in new, physical plants this side of the border.  Statistics Canada only counts the outflows from the U.S.; yet for many years — decades, in fact — U.S. expansion in Canada mainly took the form of internal growth of U.S. branch plants and subsidiaries financed by reinvestment of part of their earnings generated here.

Retained earnings accounted for as much as 96 per cent of U.S. direct investment in Canada between 1970 and 1982; and 57 per cent between 1983 and 1991.  So, if these are included in FDI as they should be, Canada is still a large net importer of FDI.

In any event, imperialism loses its meaning if it is simply read as instances of foreign investment.  This is because all but the smallest capitalist states would have to be labelled as imperialist whenever some of their businesses invest outside their borders.  This is an all-too-economistic understanding.  As Panitch and Gindin remind us, imperialism must also be seen as a form of extended political rule, even though that rule may be of an informal type, as has been typical of American imperialism.

Over what “Third World” nations can Canada impose its will?  The correct answer is: only the “Third World” peoples within its own borders — Canada’s First Nations.

To date, Canada does not possess the military and diplomatic levers to protect the investments of its multinational corporations.  Of course, this might be changing, as the articles by Chris Arsenault and Anthony Fenton in the November/December 2006 issue of Canadian Dimension suggest.  And yes, Canadian troops are part of the occupation forces in Afghanistan, and Canada plays a dastardly role in Haiti.  The reasons for these actions, however, have little to do with protecting corporate Canada’s miniscule investments in these countries.  Rather, they are part payment of Canada’s dues to maintain our good standing in the American empire — something our leaders thought they might have lost for refusing to join with the U.S. invasion of Iraq.

So, finally, is Canada an imperialist state?  Yes, I would say — but only as a second-tier member of U.S.-led collective imperialism.  The American empire works through other states, including the Canadian state, and in this sense the Canadian state is complicit in imperialism and Canadian capital certainly benefits from imperialism.

Yet, Canada does not have the capacity to act as an independent imperial power.  This is not meant to downplay Canada’s exploitative role in several underdeveloped countries, but only to give it context.  If, under the Pentagon’s urging, Stephen Harper’s Conservatives continue to expand our military machine, it is plainly possible that Canada’s role could evolve into something like that of Uncle Sam’s deputy sheriff.

What this analysis highlights, then, is how the current drift of Canadian politics toward an imperialist-complicit posture is one upshot of the loss of the kind of Canadian-centred political economy we were attempting to build in the 1970s.  It also highlights how the current drift towards militarism pulls us away from the kind of internationalism most Canadians cherish.

Cy Gonick, retired economics professor, is publisher and coordinating editor of Canadian Dimension ( and executive producer of Alert Radio.  Originally published in Canadian Dimension‘s November/December 2006 Issue.

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