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Ed Greenspon: Hello. I'm Ed Greenspon, Editor-in Chief of the Globe and Mail. Welcome to the Globe Round Table, a gathering of serious-minded people, all capable of running General Motors. Speaking of General Motors, today we'll discuss whether the greatest free enterprise nation in the history of the world has gone socialist. We'll talk about the upcoming G20 meeting of world leaders and what they need to do next, and we will briefly visit the Mulroney-Schreiber inquiry. With me today are three inquiring minds, Doug McArthur, the Distinguished Fellow in Public Policy at Simon Fraser University, a former cabinet minister in Saskatchewan and deputy minister to two premiers in British Columbia; Jodi White, former chief of staff to Joe Clark and Kim Campbell, and currently a public policy scholar at the Woodrow Wilson Centre; and John Manley, senior counsel at the law firm of McCarthy Tétrault and Canada's former minister of Industry, Finance, Foreign Affairs and deputy prime minister. Welcome to you all.

Jodi White: Hi, Ed.

Doug McArthur: Morning.

John Manley: Good morning.

Ed Greenspon: Good morning. Well, you know, it used to be thought that the president of General Motors would have the power perhaps to influence who could be president of the United States, but who would ever imagined that the president of the United States could fire the president of General Motors? The world is definitely turning. So you know, let me start with you, John. I mean this is quite the intervention directly into the economy and it follows a lot of interventions into obviously let's say a, you know, major economic crisis. But nonetheless, are you at all getting concerned of how deeply the government is playing in particular industries?

John Manley: Well, I think in the case of GM and Mr. Obama's intervention, I think he owns it anyway. So I think he's — I don't know how much he and his advisors know how to repair a broken business, but they do know politics well and I think that they did the calculation that if they didn't — if they didn't take some fairly drastic action at the management, that they would never be able to sell politically any solution that they might finally come up with. And so I think that that is what drove this decision to, essentially to, for Washington to dismiss Rick Wagoner as CEO of GM. But you know, sometimes you have to be careful what you wish for. It was really Washington that saw to the appointment of a new CEO at AIG and ended up really having to distance themselves from him as well, although it was a different administration. So not — these are tough times. It's not really obvious for firms what the way to solve the problems is and for politicians it's even more difficult.

Ed Greenspon: Hey Doug, I'm going to get to you in a minute about you know obviously, you know, the theories that capitalism was going to wither and die on its own. But Jodi, you're sitting in Washington. What is the feeling there, as far as you can discern with the people that you're speaking to, about the increasing presence of the government in the economy, in the marketplace?

Jodi White: Well there is no doubt that down here they do toss around the term socialism, and it's one of those hoary beasts in America. And, but I don't think where it's being tossed around, those are the really serious conversations. I mean I think the polling showed that an awful lot of Americans, and Canadians frankly, didn't really feel that these industries should be bailed out, had real trouble trying to grapple with the sort of commonsense of they were producing the wrong cars. People weren't buying them. They weren't keeping up to foreign competition and, and therefore something had to be done. So in fact, I agree with John. I think it's a political move and I think it will be seen as, as good. You know, he will wear this now. I think we're probably heading towards the bankruptcy of this company basically and this may be one step towards it. But I think it had to be done. I mean if the government is going to put all this money in, the people who pay the bills do get a say and they decided to have a say, at this level basically. And I don't hear anybody who is disagreeing with the decision at all, but I guess nobody convinced that this is the solution either or that the end is close in terms of this entire tale.

Ed Greenspon: Doug, are you feeling that this was all inevitable and written about in the middle of the 19th century?

Doug McArthur: Well I'm not sure that it was quite predicted at that time in this form. But you know, I think we should be honest. I mean we do have a kind of evolving socialism taking place here. We now have the failure of major financial institutions, failure of major industrial sectors to be able to do their job. As they're not meeting the expectations and anywhere close to those expectations that were kind of set out in this social contract we had in the '90s and the current decade, that if left alone and left to pursue without very many rules, pursue their own objectives as large capitalist countries — companies, that they would do well for the rest of society. And what they've turned out to be is a threat to the rest of society and that's clear. So what we're having is we're really having a form of socialization of major parts of the camp — of the economy, socialization of risk, socialization of responsibility, socialize — what we mean by that of course is the taxpayer is becoming responsible for these corporations and for their wellbeing and for their capitalization and so on. So yeah, we do have something of a sort happening in that sort. It's been pushed by events. I think that — I think it's wrong to ascribe this to politics. I think what happened was that the auto companies reviewed by a highly professional and great expertise, a panel of people, looked at these plans and said look, these people are just not up to it. They can't do it. The government cannot go along with what they've set out to do and what this means, and this is what the statement said — we have to, we have to fundamentally restructure these companies, we have to fundamentally restructure the management. We know that in many ways the people are what make the difference in corporations. And so they bit the bullet. I don't think it was easy at all to do. I think what the Obama administration did was, having seen what they had to do policy-wise, and this was essential to get this thing back on track, having seen what they had to do policy-wise, then they had to develop a political message that worked. And of course there is a political message that works here and that is simply speak to the people's feelings. So the people have got it right here. These companies are failing. It's a, it's unfortunate and really regrettable that it's the people that have to save these companies. But if the people are going to have to save them through their government and through their tax dollars, then the government has a right to say in who's running and how it's going to be done.

Ed Greenspon: Okay, so Doug's basic position, if I could put it this way, is that economics is the base and politics is the superstructure. But John Ibbitson argued in Tuesday's Globe that this is very much the constituency that elected Barack Obama. And he made sounds about saving Detroit and not allowing Detroit to go back and the U.S. auto industry will continue to be in Detroit, which I guess means that it won't be in Tennessee and other places for its headquarters. I mean it's — there's quite a political statement attached to this, isn't there, Jodi?

Jodi White: Yeah, there is. I basically also agree with Doug. I mean I don't think I was saying it was all politics. Clearly economics has driven this, as we all know. But also, you know, once the people's money comes into play, it suddenly turns political, as it should. And so — and I'm not, I think the President, it was a good statement yesterday . I'm not sure if he's going to be able to keep all those promises. I mean he ended up promising follow-through on warranties and things .I mean I found that a little more astonishing than firing the CEO because you know, he is, was getting down into the weeds then as to what is going to happen. And I think you know, these are the questions that come up when you're facing bankruptcy. I think two of the major questions, and certainly in Canada, are the pensions and the healthcare plans of the pensioners and the retirees who may be the people even the most hurt because they can't go out and get another job. They're probably past that. People who are losing jobs, it is not a nice position to be in, but have the potential to find another job, if they can. But I think for a lot of retirees, there could be real catastrophe in the future.

Ed Greenspon: Well we may have socialize private pensions too.

Jodi White: Yeah.

Ed Greenspon: Which brings it back home, John, which is where I want to take it. What now does this mean for Canadian policymakers and their, you know, what leverage do they have? What is it going to mean for the Canadian auto workers? How does this latest — I won't call a wrinkle, it's much bigger than a wrinkle, but this latest part of the game play out in Canada?

John Manley: Well I think quite frankly our government has been feeling very uncomfortable with this probably for ideological reasons. I mean the Canadian government, not so much the Ontario government, and they're faced with the proposition that well, they don't want to be doing anything that looks, smells or sounds like a bailout. They can't very well stand aside while the US government does something and the jobs just leave and go to the U.S. So I thought they looked a little bit like the deacon caught in the whorehouse on this. They really don't want to be there, but they are. And you know, they're going to have to do something and I think they'll follow very closely. I think we had a release yesterday that the Prime Minister talked to Mr. Obama, that he was very supportive of his approach on autos, that we're basically there for 20 per cent, as long as the U.S. government is satisfied. It's not exactly proactive, but I guess it's something. And I think it matches the political reality that exists in this situation, where we, you know, no government could stand idly by, even if these companies in the end are not — not savable and say well, we don't — you know, we're not going to stand by the Canadian workers. We're gonna, we're gonna let these jobs go to the U.S. You just can't do that.

Doug McArthur: But it goes even further than that. I mean the policy that Canada adopted and the Minister announced yesterday is really like working off the copy paper of the United States. I mean it was almost identical, except with respect to financing the warranties and I suspect it's just that's because they got that part of the copy paper late and didn't have time to put it in. You know, Canada is going to be following the U.S. on these kinds of things. We, you know, because we have this integrated economy, because we have a government that doesn't really have its own vision or plan as to how to deal with the, the pattern of the economy, the problems in the economy. After all, this is the government that's completely rejected any notions in the past of industrial strategies. So we're going to be just tucked right in behind the U.S., copying them fully. And I guess as long as the U.S. government's making good policy decisions, that's good for us.

Jodi White: Well I think we have to in this industry because this is a totally integrated industry. And so that I don't think there was a lot of — I mean the fact that they are following and are making phone calls and are in touch makes me feel better about it in terms of this. I mean I think there are some economic planning questions that can be you know dreamed up in Ottawa and implemented by Ottawa without consultation. But on this industry, I think absolutely we have to be together with them and protecting our share of that industry. That's going to be the major part of it, to make sure there isn't some kind of move in the United States to say you know, let's just hive off the Canadian part of the industry and go it alone with all the American money that they're putting into it.

Ed Greenspon: Well let's move it onto a macro level. Twenty of the world leaders in any case are gathering in London as we speak. And let's start with Stephen Harper at the G20 meeting. He's been out on U.S. television again, putting forward some Canadian positions, and one of them he's putting forward is that, is that we're going to be the first country out of this probably and that he doesn't want to see more money going in and we'll perpetuate, perpetuate deficits. A lot of the other countries seem to be talking much more about more and more stimulus and obviously General Motors is going to be, and Chrysler is going to be more costly than people might have expected a couple of months ago. So John, let me start with you. Is the Prime Minister going into the G20 with a sustainable position?

John Manley: Well I think he's in a good position. He's got some good statistics and numbers to point to. I think it's always important not to overestimate our importance in these, in these meetings. You know, we're one of the smaller economies, quite frankly, at the G20. And you know, we are in a good position to say look, you know, we've done pretty well. Some of our basic, our basic, the basic architecture of our economy has been sound. Certainly we've been, our banks have performed extremely well and that's, that's good. But you know, the big players at this meeting —

Ed Greenspon: But I wonder what about the politics coming out of the G20. I mean you're talking usually the United States being a policy taker on cars. Are we you know, does he run the risk of sort of being a bit out of concert with, with the consensus or does he get to be a bit of a, a leader in, a moral leader in terms of our banking sector in that?

Jodi White: I think that's where he's, what he's trying to do. A Canadian official is co-chairing the working group on financial regulations in the G20, so that is where, what our brainpower has been working on since November in terms of part of the whole planning of this meeting and leading up to it. And, and I think the Prime Minister's interviews were very much trying to lay the groundwork to remind people that our strength was in some financial regulation that we seem to do right as opposed to others. And so I think he wants to position himself very much there in terms of this meeting. On the stimulus, I mean we have gone along with the 2 per cent of GDP that the G20 decided on also in November. The United States has done that. Europe is, is, seems to be the bigger problem, where the debate goes on. And so he will be obviously close to Obama on that side of things. But I think the interviews over the weekend were very much trying to position Canada on this financial regulation side of things, and there's obviously going to be some announcements on that coming out of this meeting. I just think there's no doubt about that.

Doug McArthur: I have a somewhat slightly different view about this conference. I don't think Harper's visitations in to the States on the Sunday news channels say much in particular about Canada's role when it gets down to the hard questions. There are going to be three really fundamental questions that, that the — that there's a focus on. One is going to be are we going to, as an international, as the G20, are they going to support a substantial additional stimulus undertaking if it's needed and looks right? In the US, they consider that there likely will be a need for another stimulus. We're going to have, second point of view is going to be the Europeans, who take the position that look, this was an American, a North American and American generated problem. The Americans were so enthusiastic, along with the Canadians and the Brits, to take apart their safety net, their social security safety net. We in Canada joined into that. The social, the welfare system was dismantled by the federal government in the 1990s. Our UI system or EI system, as they call it now, was revamped by the same government to the point where now we only have a third of our people receiving unemployment assistance in a time of crisis. The Europeans took a different view. They said we're — and are under great attack from Canadians and Americans — they said we're maintaining our social security safety net. That's what you need if you have problems — they didn't envisage the sort we're going to have here, but that's what you need to get through. And to avoid having to spend such huge amounts of money on stimulus, you've got to have a strong system of backing up people. Then we've got another position, which is the whole thing should be about restructuring the international financial system and it's focusing in on the IMF and whether or not China and Asia are going to have a bigger role in the IMF. As everyone agrees, there's more money needed to be put into the IMF. Canada is going to be with the United States and Britain, probably Australia, on — well perhaps not on the last point Australia — but Canada is going to be right with the United States on these questions and partly because we've been with them in the past and we sit in the same position as them.

John Manley: Gee, I must have missed the 1990s. I don't remember dismantling our social safety net.

Doug McArthur: Oh you don't remember CAP being taken, the Canada Assistance Plan being removed by the Liberal government in the 1990s, John? You don't remember the EI system being radically altered so that the problems for unemployed people long term would go to the provinces.

John Manley: So reform of some of these measures now is tantamount to eliminating them?

Doug McArthur: No, no, radically altered.

John Manley: I don't think so. I think that when you've got a strong employment situation, as we did in the 1990s, thank goodness, trying to ensure that your employment insurance system isn't a disincentive to people taking jobs is probably — is probably a good reform and I think that's what Lloyd Axworthy was trying to do with many of those reforms. But you know, I don't — to say that we dismantled our social safety net, I just don't buy that.

Doug McArthur: Okay, then go and look at the —

Ed Greenspon: Look, guys, let's go back to the G20. Let's get out of the 1990s, which were, which were — you know, I think we'd all actually like to be back in the 1990s with the problems we had then. But let's just go back to G20 for a second, okay? John, you said that Canada isn't a big player in these and, in these sorts of meetings and obviously it's only a big player back in Canada. China and the United States, nobody would deny that they're big players, huge players in this. We've seen a lot of stunting between them going into, into over the last couple of months, in going to this meeting about, about world currencies, about you know Geithner has said that the US Secretary of Treasury has, has made some statements about the Chinese currency being, being fixed and the Chinese have made a, some comments about the US currency not being, being you know, the world's reserve currency anymore. What's going on between those two powers? Have you got a sense of that?

John Manley: Well this isn't new. This, I mean the discussion about, about Chinese, the Chinese currency has been going on quite a long time, including when I was attending G20 meetings and trying to engage my Chinese counterpart on the question of their exchange rate. I think from, from our point of view, and I think it's — I think that it's a general point of view in the G7. The Chinese have been able to successfully keep their exchange rate low and this in part contributed to the trade imbalance that built up through the '90s and into the first part of this decade, whereby you were seeing really massive increase in growth in China through the production of largely goods that were being exported in large measure to the United States.

Ed Greenspon: And has that become a dangerous irritant now?

John Manley: Well it's, it always was an irritant. A lot of the analysis about the roots of the crisis that we're in point to that as being one of the key problems because not only did you have this huge trade and then current account deficit that was being generated by this, and it wasn't all China. It was other emerging economies and it wasn't all the United States, it was other developed economies, but they were the big players. You also had seven out of ten dollars of global savings being parked in the United States. This drove quite low interest rates. It created this environment in which there was, there was a real fight to find yield. And that produced in among other things, it produced some of the financial incidents that have proven to be so problematic. And it certainly fueled the sub-prime mortgage development, which was the product of excess savings, looking for yield in some fairly creative ways, so all of it is linked.

Doug McArthur: I think that we should be looking forward here rather than back at that period because what we have now is China being very anxious about what's happening in the international financial system. You see them now hinting that they don't have as much confidence. They're being very careful about this of course because it's very tricky. But talking about, emphasizing and trying to further develop special drawing rights so they can move away from the American currency as the way they hold their savings. That could have huge implications for the reordering of the international financial system. And then this whole discussion about IMF, $500-billion at least required, everyone agrees, probably double that, to put into IMF. And there's a fundamental difference between Asia and particularly China and the Asian countries and the West about who should be putting in, but not just who should be putting in how much, but what it means in terms of who has control or who has a say in how the world system is going to be restructured. So we're facing something that's very similar in a way to after the Second World War in some of these questions not receiving a lot of attention, but this is really being talked about.

Jodi White: And that was precisely why the G20 was created, was because they needed those conversations with these countries. So I mean I think, I mean this will be the first one with a new president, who has obviously changed the landscape entirely in the United States in the midst of all of this crisis. So I think it'll be important to see how it goes this time in terms of you know, that relationship with China, which will be so key, I agree.

Ed Greenspon: I promised our listens that we'd turn quickly at the end to the Mulroney-Schreiber inquiry. I don't know if you guys want to cover your eyes, you know, to protect yourself from this kind of horror of the conversation, put you fingers in your ears. But we do have an inquiry, we do have a judicial inquiry, oddly enough called for by you know, by Brian Mulroney himself, although I think he rues the day that he did that.

John Manley: It's called buyer's remorse, I think.

Ed Greenspon: Do you see this as a necessary type of process to flush out some of the historical facts around this or do you see this as just you know, living in the past and we should be leaving it behind? Jodi, why don't you start?

Jodi White: Well I don't think we're going to learn much, I guess, so I think it is unfortunate. And I think Mr. Mulroney divulged all of what he did at the last time he was before the House of Commons committee.

Ed Greenspon: Were you satisfied with, with what the had to say then?

Jodi White: Yeah, I think I was, yes. And I'm sure some weren't. You know, there are those who will never accept anything that he says. But in terms of anything I have seen, I think we know it all. I think he has indicated he made a terrible mistake and you know, will certainly rue the day of that. And I'm not sure we're going to learn anything new, so I think it's unfortunate to drag it all back. But as you say, I mean, he sort of got himself into this. He called for it and then the government got cornered and there we are. And there are certainly a lot of what I would probably go, call Mulroney haters, who want it and want to make sure the legacy, any legacy is totally destroyed.

Ed Greenspon: Doug?

Doug McArthur: I think there's two things why this is a good thing. One is Mr. Mulroney by his own making put forward information that we simply cannot rely upon on a matter that's greatly, of great importance. Why did he take this money? I mean I heard Robin Spears yesterday attacking the Globe and Mail for making it known that this cash was taken and blaming the whole thing on that, ignoring the fact that we don't know, and there is no good explanation. It's very suspicious why this money was taken. The second thing is he made some statements about never having met Schreiber when he was testifying earlier, and now that turns out — or only met him a couple of times very briefly and that turns out to be untrue. There's some things that don't add up. But the other thing that I think is really important about this, and I hope it gets some attention, is it points to a much larger problem in, in the Canadian federal government, the federal system. These are huge procurements, procuring decisions, huge expenditures by the government, purchasing military equipment, purchasing airplanes, hundreds and millions and billions of dollars involved. Why do we have decision processes that even invite lobbying, even invite the exchange of money to go and meet with ministers? Ministers are having a role in deciding how these, this money is going to be spent. This money should be spent on the basis that we, we all accept generally should be the rule, and that is set out the terms of what's needed and then it's a competition and go, and base it on an objective competition. It is a scandal that this is how it's done in Canada. No other country — well virtually any other country, democratic country would not accept this way of doing business. It's time that changed and it's time this —

Jodi White: Boy, I don't know —

John Manley: I don't think that's true.

Jodi White: What system are you talking about? Yes, exactly. I don't agree with any of that.

Ed Greenspon: Okay, I'm going to just — I want John to tell me. I want to just stick with Mulroney-Schreiber and not — and not —

John Manley: Not procurement generally?

Ed Greenspon: I don't want to go into procurement generally right now. I want to know if you have things that you want to know out of this inquiry and what that might be.

John Manley: No, I'm tired of it. I'm tired of it, I think that Mr. Mulroney made some serious errors of judgement. His explanations don't pass the smell test. But I'm sorry, there — this is, this is yesterday's news. Fourteen million dollars of public money to find out why he received $220,000. I don't think this does any of us any good and I would just, I personally wish the whole thing would just go away.

Ed Greenspon: Well that's a wish you're not going to get, John.

John Manley: Is that clear?

Ed Greenspon: Clear enough, clear enough. It's going to go away —

John Manley: I mean how much humiliation —

Ed Greenspon: It's going to go away right here, right now for now. I have no problem —

John Manley: How much humiliation do we have to put Brian Mulroney through, you know? I mean I was on the other side of the House of Commons. I didn't agree with, with many things that he did. I don't think this looks good, smells good, sounds good. But it's, it's not going to improve the job prospects of anyone but lawyers by the time this is done.

Ed Greenspon: Your government was involved in part of an inquiry itself in this, back in —

John Manley: Yeah, and I think — and I think we found ourselves embarrassed by it and it, and it — I do, I'd love to know whether we were, we were given full and truthful information upon which we settled a defamation action. But again, there's just too many important things to be preoccupied with, without, without you know retreading this ground.

Doug McArthur: I think this reflects a gap between Ottawa and ordinary people. Three hundred thousand dollars for most people, including myself, is a number of years' salary. For a lot of people, it's four or five years' salary. That's not a trivial amount of money. It may be a trivial amount of money —

John Manley: How about $14-million?

Doug McArthur: Fourteen million is a hell of a lot of money, yeah.

John Manley: Yeah, well that's what we're spending to find out what happened to this money that's long gone.

Doug McArthur: It may be a very good investment if we can fix the system.

Ed Greenspon: Okay. This sounds like a good point for me to you know, there are no envelopes of cash for any of you today. You were good but I don't want to embarrass anybody 14 years on from now. But I do appreciate the debate and the socialization of political debate that occurs on the Globe Round Table and look forward to speaking to you all again next week. Thank you very much.

Doug McArthur: Thank you, bye-bye.

John Manley: Take care, bye-bye.

Jodi White: Bye-bye.