The antifragile scale: Canada stronger than it seems

Is this country’s strength thanks to its particular blend of challenges — or, volatility — and not in spite of it?
By: /
February 2, 2015
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Things aren’t always what they seem.

In politics, that’s a truism. But what about at the larger, structural level? Do states beset with a higher rate of economic and political variability actually come out ahead?

Yes, according to Nassim Nicholas Taleb and Gregory F. Treverton, writing in the current issue of Foreign Affairs.

In their essayThe Calm Before the Storm: Why Volatility Signals Stability, and Vice Versa,” the authors argue that non-existential challenges to state stability ultimately catalyze the development of stronger political and economic systems.

It’s a compelling and highly readable riff on Taleb’s smash hit, Antifragile: Things That Gain from Disorder. The book essentially argues that to be resilient is only good enough to maintain the status quo; only if a system actually can gain from stressful experiences can it accumulate strength.

Taleb and Treverton argue in their Foreign Affairs piece that five key indicators can help in gauging the fragility of a state: centralization, or “concentrated decision-making”; economic diversity; debt levels; political variability; and experience with major systemic shocks.

While Canada goes unheeded in their analysis, there are many reasons to believe this wily northern dominion is a lot more robust than it might look.

Centralization

While there is a rich literature around the centralization of federal political power in the Prime Minister’s Office, the kind of centralization Taleb and Treverton write about is on the system level. Canada competes perhaps only with Belgium for the title of most decentralized advanced industrialized country in the world. Its multitude of provinces, territories, and regions compete with one another for demographic and economic advantage, fuelling policy innovation and positive competition. Not only this, but Canada’s ethnic identity is richly heterogeneous, making the nation’s body politic anything but monolithic by almost any measurement.

Economic diversity

Taleb and Treverton write, “For a state to be safe, the loss of a single source of income should not dramatically damage its overall economic condition.” At the moment Canada is managing through the major economic displacement stemming from the halving of oil prices in recent months. Policymakers especially in Edmonton and Ottawa have had to make significant adjustments to their spending plans, with major public policy implications. Theoretically, the subsequently declining dollar should buoy Canada’s service and manufacturing sectors, providing precisely the kind of flexibility Taleb and Treverton call for, but it will take time before the pain subsides. This represents a potential source of instability for Canada, but a manageable one for a well-developed liberal democracy. Worth nothing, as well, is the dynamism of so many regional economies. Here in the Waterloo region, tech and research are making Waterloo a global brand as the Quantum Valley, but the area has a well-diversified economy with manufacturing still representing about 20 percent of its employed population.

Debt

With a federal debt to GDP ratio of around 34 percent, our federal government’s books are in fairly good shape compared to the rest of the OECD crowd. However, when you look at gross combined government debt, the IMF puts Canada’s ratio at approximately 87 percent, — higher in the international public debt rankings than we’d like to be. As Taleb and Treverton argue, the problem with debt is that it reduces flexibility in times of crisis, and makes the entire system more lethargic and inefficient. By advanced industrial economy standards, Canada isn’t a first-rate debt hog, but we could benefit enormously from returning to a higher percentage of lean economic muscle mass.

Political variability

The rule of thumb is that countries qualify as democracies once they’ve facilitated a peaceful transfer of power as a result of free, fair, multi-party elections. But countries that experience a much more dramatic range of political variability are best prepared to manage through political crisis. The authors cite Italy, with 14 premierships in the past 25 years, as a prime example of a nation accreting political durability through moderate, persistent political stress. Canada, too, has experienced political turmoil at the federal level in the last two generations. From national referenda touching the very soul of the nation, to minority governments and controversial parliamentary battles, Canada is stronger for its portion of controversies, and should be increasingly confident in its ability to weather political storms.

Surviving volatility

The authors write that nations are stronger for having survived major shocks in recent history. They point, for example, to the Asian states that emerged from the 1998 Asian financial crisis and the former Soviet states that have overcome the political and economic odds to consolidate as more liberal entities. Canada has overcome its own major shocks. The FLQ crisis is perhaps the most obvious example, but so too are both the 1980 and 1995 Quebec referendums major instances of shock absorption and recovery. Not to mention Canada’s relatively exemplary management and recovery from the Great Recession.

Strong and free

Canada isn’t a perfect country — there’s no such thing. We have our share of economic and political challenges. But having managed through many shocks and stresses, Canadians have built a strong, liberal, and diverse nation. We have much hard-won wisdom to share with the world, especially with respect to building cultural bridges between peoples.

Canada is stronger for its challenges, and the world is better-off for Canada’s strength.