IN PRINT ARCHIVE CIR Fall 2000
|by Barb Clapham|
Money. We use it every day without thinking too much about what it actually means to us. When feelings about money are explored, though, we find it represents a great deal more than simply a means to pay bills, save for the future or to spend on goods and services. Our money is a potent symbol of our country and of our sovereignty from other nations. One of the ways in which we feel distinct as Canadians is through ownership of a unique currency.
Increasing capital mobility and globalization of markets have called into question the value of a single country having a single currency. Europe recognized and responded to this changing environment by developing the euro, which is slated initially to replace the individual currencies of 11 different countries, with additional countries expected to join at a later date. Arguably the second most important currency in the world following the U.S. dollar, the growing euro area is expected to lead to competition with the dollar area, and there has been talk of a yen currency area. In light of these events, should Canada rethink its currency policy?
The winner of the 1999 Nobel Prize in economics, Robert Mundell, has spent most of his lengthy career analyzing the effectiveness of monetary and fiscal policy under various exchange rate regimes. His research shows that a currency functions best when it is used over as large an area as possible. Such a system provides significant economies of scale, increased ability to absorb shocks and a more stable inflation rate. His research led to the idea of optimum currency areas, whereby a set of nations share a common currency (such as the euro).
Although Mundell thinks Canada is a fortunate country, in his opinion our federal government has made economic blunders that have hurt the country. He elaborates on this view in an interview.
Since the possibility of developing a new, common currency with the United States is very slim at present, one option available to Canada is dollarization - adopting the U.S. dollar as our unit of currency. However, our patriotic feelings about money would stand in the way of such a move. Even if it would benefit Canada economically, any political party that suggests this will appear to be selling out to our southern neighbours. Dollarization would lead to a loss of self-respect on the part of Canadians, who would feel like they had just become the 51st state.
The cost of a lack of national pride and autonomy is difficult to calculate. The majority of Canadians may not voice their patriotic feelings, but I believe they think of their country in the same way Winston Churchill expressed the feelings of the English towards Europe:
"But we have our own dream and our own task...We are linked but not combined. We are interested and associated but not absorbed."