Introduction
KEITH BANTING, GEORGE HOBERG, AND RICHARD SIMEON

The late twentieth century is an era of dramatic change. Governments in advanced industrial nations such as Canada and the United States are under powerful pressures from changes that are sweeping through both international and domestic life. A deep restructuring of the global economy is reducing the economic importance of national borders, and new technologies are transforming traditional processes of production. Exciting opportunities are emerging for those on the leading edge of innovation; but many jobs are disappearing, average incomes are stagnating, and the wider sense of security that most citizens enjoyed in the postwar years is eroding. At the same time, more complex domestic societies are emerging on both sides of the border. Greater social diversity, or pluralism, characterizes virtually every aspect of society: occupational and class structures, the racial and ethnic composition of the population, the forms of family life, the nature of religious practice, prevailing patterns of sexual behaviour, and the range of broad lifestyles.

International economic restructuring and increasing social fragmentation have produced a daunting policy agenda to which Canadian and American political leaders must respond. More critically, these changes often press in very different and competing directions, and the state is the point where they collide. On one side, the need to remain competitive in the global economy creates pressures to promote economic adjustment, to reduce detailed regulation of economic activity, to lower taxes on corporate activity, and to tame large budget deficits. On the other side, increasingly diverse social groups demand government action to advance a variety of reform agendas and to cushion the impact of dramatic economic change on workers and communities. In a sense, contemporary governments serve two masters. Each generates distinctive and often contradictory demands. One registers in exchange rates, investment patterns, and international agreements, the other in ballots and organized interests.

In Canada and the United States, as in many other Western nations, there is serious division over how government should manage these contradictory pressures. If government pursues a redistributive agenda, business and financial interests complain that their ability to compete in the global economy is impeded by the apparent incapacity of government to set its house in order; but if government pursues a competitiveness agenda, domestic social groups fear for the future of welfare, labour, and environmental programs. The inability of governments to fashion a consensus of these central issues is fuelling a crisis of confidence in political leaders and institutions. In both Canada and the United States, failure to deliver on public expectations contributes to a widespread disaffection, which shows up in numerous ways: in the intensity of public protests, in the lack of trust in political leaders, in the erosion of faith in existing political processes, and in the sudden emergence of protest parties and movements such as Ross Perot in the United States and the Reform Party in Canada. Not surprisingly, this disaffection further undermines the capacity of governments to build consent for major policy change.

In effect, deep-seated economic and social changes have eroded the social contract -- the predominant understandings about core economic and social relationships -- that was built up during the postwar era. The challenge for governments in Canada and the United States is to fashion a new accommodation between the economic and social pressures that increasingly define contemporary life. The gnawing concern centres on their capacity to do so.