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Reexamining the “obsolescing bargain”: a study of Canada's National Energy Program

Published online by Cambridge University Press:  22 May 2009

Barbara Jenkins
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Extract

Rarely has an issue in the field of international political economy aroused more controversy than the role of the state in economic development. Much of the debate centers on theories of dependency which portray the state as a captive of the “universal standards” of international markets, constrained by its position in the international capitalist economy. In response to this provocative stance, there has been a recent renaissance of theories which see the state as a prominent force in the contemporary world economy. Numerous authors from a wide ideological spectrum have endorsed this argument. In their view, the state is not a helpless puppet subject to the whims of international capital and a comprador bourgeoisie. On the contrary, it is a key economic player capable of using international capital to forward its own interests.

Type
National Energy Policies
Information
International Organization , Volume 40 , Issue 1 , Winter 1986 , pp. 139 - 165
Copyright
Copyright © The IO Foundation 1986

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References

1. Examples of the wide ideological variation among adherents to this view are: Bergsten, Fred, Horst, Thomas, and Moran, Theodore, American Multinationals and American Interests (Washington, D.C.: Brookings, 1978)Google Scholar; Gilpin, Robert, U.S. Power and the Multinational Corporation: The Political Economy of Foreign Direct Investment (New York: Basic, 1975)CrossRefGoogle Scholar; Bergsten, Fred, “Coming Investment Wars,” Foreign Affairs 53 (10 1974)CrossRefGoogle Scholar; Moran, Theodore, Multinational Corporations and the Politics of Dependence: Copper in Chile (Princeton: Princeton University Press, 1974)Google Scholar; Grieco, Joseph, Between Dependency and Autonomy: India's Experience with the International Computer Industry (Berkeley: University of California Press, 1984)Google Scholar; Stepan, Alfred, The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978)Google Scholar; Frank, Isaiah, Foreign Enterprise in Developing Countries (Baltimore: Johns Hopkins University Press, 1980, chap. 3)Google Scholar; Richards, John and Pratt, Larry, Prairie Capitalism: Power and Influence in the New West (Toronto: McClelland and Stewart, 1979)Google Scholar; and Warren, Bill, Imperialism: Pioneer of Capitalism (London: Verso, 1980).Google Scholar

2. For examples of such models see Kindleberger, Charles, Economic Development, 2d ed. (New York: McGraw-Hill, 1965)Google Scholar, or Mikesell, Raymond, “Conflict in Foreign Investor-Host Country Relations: A Preliminary Analysis,” in Mikesell, , ed., Foreign Investment in the Petroleum and Mineral Industries (Baltimore: Johns Hopkins University Press, 1971)Google Scholar. These theorists presented models that presumed each actor came to the bargaining table with various strengths and weaknesses. While the host government had raw materials, markets, and powers of taxation, the MNC possessed the necessary marketing and technical skills and financial assets. The outcome of the interplay of these factors would be a result of “joint-maximization” as each side used its strengths to obtain a suitable bargain. For more recent critiques of these theories, see Bennett, Douglas and Sharpe, Kenneth, “Agenda Setting and Bargaining Power: The Mexican State vs. Transnational Automobile Corporations,” World Politics (10 1979)CrossRefGoogle Scholar; Gereffi, Gary, The Pharmaceutical Industry and the Third World (Princeton: Princeton University Press, 1983), p. 74Google Scholar; and Moran, , Copper in Chile, p. 158.Google Scholar

3. Vernon, Raymond, Sovereignly at Bay: The Spread of U.S. Enterprises (New York: Basic, 1971).Google Scholar

4. Ibid., p. 53; for a full elaboration of this argument, see Ibid., pp. 47–53.

5. Moran, , Copper in Chile.Google Scholar

6. Gilpin, Robert, U.S. Power and the Multinational Corporation: The Political Economy of Foreign Direct Investment (New York: Basic, 1975), p. 59.CrossRefGoogle Scholar

7. Warren, , Imperialism, p. 164.Google Scholar

8. See Vernon, , Sovereignty, p. 48.Google Scholar

9. Bergsten, , “Coming Investment Wars,” p. 139Google Scholar; Bergsten, , Horst, , and Moran, , American Multinationals, p. 143.Google Scholar

10. Richards, and Pratt, , Prairie Capitalism, p. 9.Google Scholar

11. For a more in-depth analysis of the “new orthodoxy” arguments, see Biersteker, Thomas, “The Illusion of State Power: Transnational Corporations and the Neutralization of Host-Country Legislation,” Journal of Peace Research 17, no. 3 (1980), pp. 207–21.CrossRefGoogle Scholar

12. For an interesting historical analysis of the progression of increasing state power over MNCs, see Lipson, Charles, Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (Berkeley: University of California Press, 1985).Google Scholar

13. The quotations are from, respectively, Bergsten, , Horst, , and Moran, , American Multinations, p. 130Google Scholar, and Lipson, , Standing Guard, pp. 112–17.Google Scholar

14. Richards, and Pratt, , Prairie CapitalismGoogle Scholar, chronicle the evolution of government policy toward foreign oil companies.

15. Oil, Imperial, Annual Report 1972Google Scholar, quoted in Laxer, , Oil and Gas: Ottawa, the Provinces and the Petroleum Industry (Toronto: Lorimer, 1982), p. 23.Google Scholar

16. Laxer, , Oil and Gas, pp. 41–43.Google Scholar

17. Ibid., pp. 41–46.

18. Department of Energy, Mines and Resources (EMR), The National Energy Program (Ottawa: Supply and Services Canada, 10 1980), p. 2.Google Scholar

19. Petroleum Industry Monitoring Survey 1981 (Ottawa: Supply and Services Canada, 1981), p. 32.Google Scholar

20. EMR, The National Energy Program, p. 52.Google Scholar

21. Financial Post, 29 November 1980, p. 11Google Scholar (statement by Martha Byorum, senior energy analyst); Financial Post, 18 April 1981, p. S2Google Scholar; Premier Peter Lougheed of Alberta, quoted in Carmichael, Edward and Stewart, James K., Lessons from the National Energy Program (Toronto: Howe Institute, 1982), p. 7.Google Scholar

22. Oilweek Magazine, 24 October 1983, p. 18.Google Scholar

23. The interviews I cite throughout this article were conducted between December 1983 and January 1984 in New York State, Toronto, and Ottawa with executives from major oil companies and officials of the Canadian government. All interviews were confidential.

24. Financial Post, 23 May 1981, p. 6.Google Scholar

25. Carmichael, and Stewart, , Lessons from the National Energy Program, p. 11.Google Scholar

26. See the National Energy Program Update 1982 (Ottawa: Supply and Services Canada, 1982).Google Scholar

27. Oikawa, Dana, “The New Canadian Energy Policy: What It Is and What It Could Have Been,” Canadian Business Review 10 (Autumn 1983), p. 7.Google Scholar

28. Financial Post, 29 November 1980, p. 11.Google Scholar

29. Provisions have been made in the PIP legislation to control “leakage” from companies with a high percentage of Canadian owners to those with a lower percentage. A series of complicated formulae exist whereby “adjustments” or penalties are incurred in situations where a Canadian company's expenditures are deemed unduly high in view of the interest they receive. These adjustments do not apply, however, until the expenditure to working interest ratio goes above 2:1.

30. Financial Post, 8 October 1983, pp. 1–2.Google Scholar

31. Moran, , Copper in Chile, p. 257Google Scholar. Joseph Grieco's study of the Indian computer industry, Between Autonomy and Dependence, cites Moran's argument approvingly. Grieco found that although bureaucratic struggles originally impeded government control over MNCs, these hurdles were eventually surmounted as factions within the ruling Janata coalition pushed for a harder stance toward MNCs such as IBM.

32. For example, Bergsten, , Horst, , and Moran, , American MultinationalsGoogle Scholar; Richards, and Pratt, , Prairie CapitalismGoogle Scholar; and Bergsten, , “Coming Investment Wars.”Google Scholar

33. Financial Post, 6 February 1982, p. 3.Google Scholar

34. Statement by the former premier of Alberta, William Aberhart, quoted in Richards, and Pratt, , Prairie Capitalism, p. 80Google Scholar. Richards and Pratt provide a thorough analysis of relations between provincial governments and private enterprise. Of particular interest is chapter 3 which provides a history of the relations between the Alberta government and the multinational oil companies.

35. Financial Post, 5 June 1982, p. 4.Google Scholar

36. It would be erroneous to portray the Canadian oil companies as having a uniform response to the NEP. In this section, I am referring primarily to the numerous smaller Canadian firms known as the juniors. The government deemed a positive response by the juniors as a critical vindication of the NEP. Thus, the juniors' negative reaction was a major setback to the NEP's continued existence.

37. Toronto Globe and Mail, 2 June 1982, p. B3.Google Scholar

38. Financial Post, 28 March 1981, p. 24.Google Scholar

39. It is important to note here that the courting of local allies is a particularly valuable exercise in Canada. Given previous attacks on their activities by Canadian nationalists, foreign MNCs prefer to keep a low profile. Lobbying with local businesses made the MNCs' complaints appear more legitimate.

40. Quoted in EMR, The National Energy Program, 2d ed., p. 4Google Scholar; Ibid., p. 5.

41. Moran, , Copper in Chile, p. 131Google Scholar; Tugwell, Franklin, The Politics of Oil in Venezuela (Stanford: Stanford University Press, 1975), p. 31Google Scholar; Ibid., p. 162.

42. Prime Minister Brian Mulroney, in an address given while he was a member of Parliament, Calgary, Alberta, 8 November 1983. The main components of the NEP were actually struck down in Parliament in March 1985 in an attack led by Energy Minister Pat Carney.

43. For a few examples of Moran's tendency to see such a trend as “inevitable,” see Copper in Chile, pp. 8, 222–23, 247, and 259.

44. Other scholars have also made this point. For example, in an interesting comparison between government intervention in Mexico, and Brazil, , Evans, Peter, Dependent Development: The Alliance of Multinational State and Local Capital in Brazil (Princeton: Princeton University Press, 1979), p. 306Google Scholar, points out that while the Mexican bourgeoisie is aware of the benefits of nationalism, it becomes wary of government control over MNCs when the government starts talking in terms of MNCs versus peasants. Evans explains that since populism is a valid option in Mexico (whereas it is not in Brazil), Mexican local capitalists fear that putting the debate in such adversarial terms will threaten “social tranquility” and thus will ally with the MNCs. Similarly, in her study of Andean Pact countries, Regional Development in a Global Economy (New Haven: Yale University Press), pp. 93–99Google Scholar, Lynn Mytelka shows that the support or opposition of the local bourgeoisie for attempts to regulate foreign investment varied according to local interests. In Peru, capitalists worried that government controls over MNCs would be extended to local firms and thus opposed such regulation. However, in Colombia the bourgeoisie saw the government's attack on foreign investment as an opportunity to expand—foreign firms were forced to divest—and so supported stiff controls. In reference to the French and Canadian cases, Lipson, Charles, Standing Guard, pp. 183–84Google Scholar, points out that neither state could mount a sustained, successful attack on MNCs. He explains this by noting the absence of communist or popular front governments in either country and the lack of a distinctive form of Third World economic nationalism.

45. Tugwell, , The Politics of Oil in Venezuela, p. 154.Google Scholar

46. Clarkson, , Canada and the Reagan Challenge, p. 57.Google Scholar

47. Financial Post, 14 February 1981, p. 1.Google Scholar

48. Canada protested that it had not abrogated “national treatment” guidelines since the energy situation was unique and required special measures and since Canada had reserved the right of the OECD to implement controls on foreign direct investors that it deemed necessary. See Clarkson, , Canada and the Reagan Challenge, pp. 29, 107.Google Scholar

49. Testimony of Robert Hormats, assistant secretary for economy and business affairs, State Department, U.S. Senate, Subcommittee on International Economic Policy, Committee on Foreign Relations, U.S. Economic Relations with Canada, 97th Cong., 2d sess., 10 March 1982, p. 4.

50. Financial Post, 13 December 1980, p. 4.Google Scholar

51. Testimony of Harvey Bale, Jr., assistant U.S. trade representative for investment policy, U.S Senate, Subcommittee on Securities, Committee on Banking, Housing, and Urban Affairs, Extension of Margin Requirements to Foreign Investors, 97th Cong., 1st sess., 8 July 1981, p. 27.

52. Clarkson, , Canada and the Reagan Challenge, p. 33.Google Scholar

53. For one of the best examples of this, see Robock, Stefan, Simmonds, Kenneth, and Zwick, Jack, International Business and Multinational Enterprises, rev. ed. (Homewood, Ill.: Irwin, 1977), chap. 12Google Scholar. See also Eiteman, David K. and Stonehill, Arthur I., Multinational Business Finance (Reading, Mass.: Addison-Wesley, 1973).Google Scholar

54. Maclean's Magazine, 10 November 1980, p. 34.Google Scholar

55. Sher, Julian, “NEP: Is It All Gloom and Doom?” Canadian Dimension 16, 01 1983, p. 30Google Scholar; Ibid., July–August 1982, p. 23.

56. Robock, , Simmonds, , and Zwick, , International Business and Multinational Enterprises, p. 258.Google Scholar

57. For another study that emphasizes the difference between potential and actual power see Bennett, and Sharpe, , “Agenda Setting and Bargaining Power.”Google Scholar See also Biersteker, , “The Illusion of State Power.”Google Scholar