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Livio Di Matteo: The road ahead for the West and the world

Commentary

As we move into 2023, it is worth looking at the past year not as a standalone point in time but as part of an era of the 21st century that future historians will likely denote as starting with the election of Donald Trump in 2016. Such convenient breakpoints are of course simply for the convenience of our human need to see beginnings and ends in history. History, ultimately, is not a series of well-labelled, watertight chronological compartments but is really a set of interconnected rivers and lakes flowing along in a general direction. It takes a while to realize when one watershed ends and another begins.

The simplest of these chronological separations can be seen as a series of periods starting from the dawn of the industrial era. For example, the “long” 19th century from the French Revolution in 1789 to the start of the First World War in 1914. Or perhaps long and short versions of the twentieth century dating either from the start of the First Great Globalization in approximately 1870 to the fall of the Berlin Wall in 1989, or from the First World War to the Fall of the Berlin Wall. One might even denote the 19th-century era as going from 1789 to 1945, with the interwar period and both world wars the final spasms of the 19th-century world order created in the wake of the 1815 Congress of Vienna.

This long 19th century would then be divided into three phases—early industrialization to approximately 1870, the second industrialization and trade globalization of 1870 to 1914, and the falling apart of this world order from 1914 to 1945. This would make the 20th-century world order of the Cold War and the Pax Americana exceedingly short—from 1945 to 1989. 

The one consistency in all of these albeit artificial demarcations is the Fall of the Berlin Wall and the collapse of the Soviet Union as an endpoint. It marks the start of a quarter century of remarkable economic change and development that can be termed the Second Great Globalization. From 1990 to 2016, the world witnessed the reintegration of Eastern Europe and Russia into world market economies, the rise of China as the world liberal economic order welcomed it into its trade and production networks with the aspiration that democracy would soon follow, and finally the spread of free trade and global supply chains, not the least of which affected Canada via the FTA and later on NAFTA. It was an era of tremendous prosperity and economic growth with an elastic aggregate global supply curve dependent on the tremendous growth of China that fueled low prices and supported low-interest rates and an age of cheap borrowing.

We will in retrospect look back on the quarter century from 1990 to 2015 as a veritable golden age, similar to how the post-1914 world eventually looked at the era from 1870 to 1913. Of course, the past never really has golden ages, and there were always problems during the most prosperous of periods. Nevertheless, prosperity mutes problems and they can fester, thus laying seeds for later turmoil and change. The era of the First Great Globalization from 1870 to 1913 was accompanied by rapid economic and social change along with soaring economic inequality. And the economic integration that accompanied it conflicted with the international institutional structures of the time, eventually leading to war. The period from 1990 to 2015 was also accompanied by rising economic inequality, asset bubbles, and low wage growth for a substantial proportion of labour forces in industrial countries. Needless to say, the growing dissatisfaction laid the seeds for populism, and, as heralded by the election of Donald Trump, had been underway for a number of years prior to 2016.

The period since 2016 has been another period of changing historical flows and the ultimate direction remains to be seen. The reaction to the Second Great Globalization was already in progress as the world was coming to realize that greater economic prosperity in more autocratic and illiberal regimes was not going to be accompanied by more democracy. The COVID-19 pandemic disrupted integrated global supply chains that were already being regarded with caution given the growing wariness of the developed world’s economic dependency on countries that did not necessarily share developed country democratic values.

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While the second decade of the 21st century seemed to suggest a world where the more democratic West and the United States were in decline given rising aspirations of a more autocratic and focused China and Russia, the future now seems to suggest otherwise.

The West has been seen as in decline at least since the days of Oswald Spengler, and yet, to borrow from Mark Twain, rumours of its demise are greatly exaggerated. So, here we are. It is Russia that has engaged in military overreach by invading Ukraine. It is China that is facing both demographic decline with its rapidly aging population, as well as pushback by its citizens against the long-term autocratic management of the COVID-19 pandemic.

Oddly enough, the decadent, irresolute, and unfocused West appears to have dealt with COVID after all, managed to develop the better package of vaccines, is solving its energy security issues, and is now rapidly coming together in cooperative behaviour to push back against both Russian and Chinese government assertiveness. And yet there is danger here as Russia and China, like individuals, can act rashly when feeling insecure.

Still, who would have thought? In the wake of the Fall of the Berlin Wall, the West began embarking on an end-of-history sense of triumphalism that was misplaced. Similarly, Russia and China in the wake of their resilience after the 2008-09 Great Recession did the same. They viewed the future as theirs, with their more monolithic state-directed and managed economies seen as superior to those of the fractious United States and its allies. In the end, democratic governments combined with the institutions of a market economy can move very nimbly when the need and purpose arise. Much like a car engine on a bitter January morning, the resolve of the West sometimes needs a couple of attempted starts before engaging.

It would appear the future of the 21st century is not a foregone conclusion after all but has yet to be written.

Richard Shimooka: Canada’s fighter jet debacle is a costly ode to unseriousness

Commentary

In the days leading up to Christmas, the government quietly made the decision to acquire the F-35. This should be the final step in the long-running saga to replace the CF-18, and the timing was fairly revealing—it is a file that this government wants to draw as little attention to as possible, given how poorly it has handled it.

Many Canadians may be confused by this development, as the government had seemingly stated last March that the F-35 would be Canada’s next fighter. Yet what was announced at the time was that it was the preferred solution, and the government would now enter into negotiations with Lockheed Martin and the U.S. government to finalize the contract. While there was the possibility that Ottawa might have decided to go to the second-place bidder, such an outcome has never occurred with a major Canadian procurement program. 

On the surface, this may seem like an orderly process, but the reality is that it reflects a serious governance failure around the procurement. Yet this was an obfuscation; in reality, this was a needlessly drawn-out process that further increased the cost to Canadians and detrimentally affected the country’s security. 

In 2014, the Harper government decided for the second time to acquire the F-35. Their negotiation for it—which was also more complex than the 2022 procurement because it incorporated a swap with the U.S. government to deliver four aircraft within a year in order to accelerate the transition—required four months. This should be seen as a baseline for comparison to the current situation, where the Trudeau government has taken 10 months to make a similar decision.

Much of the delay arises from allowing bureaucratic parties to hold up progress because of resistance to the method by which the F-35 had to be procured. While the typical refrain for this sort of objection is that these parties are ensuring the “integrity” of the process and obtaining the best value for money, it does nothing of the sort. 

In reality, the government had no real ability to alter any part of the contract under negotiation with Lockheed Martin. The government will acquire the F-35 through a unique arrangement with the U.S. government and six other countries, known as the Joint Strike Fighter Partnership. This allowed it to purchase it at the exact same cost as what the U.S. government pays. In contrast, Canada typically pays a 3-20 percent surcharge on any item purchased from the United States. The partnership also allowed Canadian firms to bid on lucrative subcontracts for all F-35s produced, which has netted $2.8 Billion dollars thus far over the past 15 years. However, to be a member, Canada was required to invest nearly $700m in membership fees and purchase F-35s for the Royal Canadian Air Force.

By acquiring F-35s through the partnership, Canada’s ability to change the contractual terms of the agreement was non-existent—those were largely established in a memorandum of understanding signed in 2006. Roughly speaking, all Canada can request is how many aircraft it wants and its preferred delivery schedule. The cost is set by the negotiations between the Joint Strike Fighter Program Office (representing the partnership) and Lockheed Martin. The program office then merely attempts to align this request with available slots in the production line. This is why Canada is only moving to acquire 18 aircraft out of a total fleet of 88 at this time—Ottawa must wait for the Program Office’s negotiation on cost to occur for future years before it can select aircraft. 

However, by delaying its own selection process, Canada’s delivery schedule has likely slipped. Earlier in December, Germany finalized its order of 35 F-35s, which will push the RCAF’s delivery slots further down the list. This is highly problematic considering the atrocious state of the CF-18 fleet, which requires urgent replacement. While the plan was to retire these aircraft by 2032, it’s unlikely now that this schedule will be met—which means the RCAF will have to soldier on with the aircraft that will be over 50 years old by the time they will be retired from service. 

But even now the limitations of the CF-18 fleet are evident. Last week, it was announced that the RCAF will not provide a rotation of fighters to defend European skies next year for the first time in five years, in spite of the ongoing war in Ukraine and Russian threats against NATO. The reality is that the RCAF is unlikely to be able to do much more than defend North America for the next decade. In the coming years, Canada will divest half of its CF-18 fleet, leaving less than 40 aging fighters to defend Canada’s airspace and its interests. Despite being updated with new radars and weapons, the remaining aircraft will be far behind the average of all of our allies. This is a key factor behind the RCAF’s poor retention rate: personnel are aware of the fighter force’s perilous state due to years of neglect and inaction and have given up and left the service. 

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Simply put, this entire situation can be attributed to the Trudeau government’s lack of leadership. Even ignoring all of the missteps on this file between 2015 to early 2022, it failed to cut through irrelevant bureaucratic objections that in real terms delayed the retirement of the CF-18s by another year, and likely cost Canadian taxpayers tens if not hundreds of millions of dollars due to the cost of keeping the antiquated aircraft flying for that additional time. 

While the fighter replacement saga is drawing to a close, similar dynamics are evident in other programs. Canada desperately requires a new Maritime Patrol aircraft to undertake security over our coasts. The current aircraft, the CP-140 Aurora, is now over 40 years old and has seen heavy service over the past two decades. As David Pugliese recently reported, Boeing Aerospace offered an untendered proposal to the Canadian government to replace them with eight to twelve P-8 Poseidon aircraft. 

Boeing’s push is partly due to the reality that the production line for the aircraft is set to shut down in 2025, and the U.S. acquisition system requires two years lead time for aircraft to be delivered. The P-8 has become the replacement for almost every single close ally that used the same airframe as the CP-140 (known as the P-3 Orion). Countries like the United Kingdom, Australia, New Zealand, Germany, Norway, and South Korea began an orderly replacement process that started a decade ago and is now nearing completion. 

Considering the Trudeau government’s inability to deliver decisions in a timely fashion, it is quite possible that it will make a decision outside of Boeing’s window of opportunity. If Canada fails to acquire the P-8, its potential options are limited. One option, which many military officials seem to fear, is that the air force will be forced to acquire a much smaller, shorter-ranged, and less capable aircraft, perhaps based on a Bombardier 6000 series. Such an aircraft would not meet Canada’s military requirements and would likely cost more than the P-8 option due to the cost of modifying the platform to meet the RCAF’s needs. 

What the entire fighter saga debacle has shown is that this government must become much more adept at making decisions in a timely fashion. Unnecessary bureaucratic processes and delays do not improve outcomes for Canada. Instead, they increase costs and compromise the country’s security. If this government is serious about improving the country’s security, this is a good place to start.