Why Mexicans Don't Drink Molson. Andrea Mandel-Campbell

they have become the most visible signposts of the entrenched poverty and gritty hopelessness that is gripping what was one of the country’s most vibrant cities.

      Wayne Marston’s eyes well up with tears as he recalls the scores of immigrant families holed up in tiny apartments on the city’s dilapidated northern fringe. The president of Hamilton’s Labour Council, Marston describes how the overcrowded living conditions force children to sleep in discarded refrigerator boxes. Unlike the newcomers who came before them, these immigrants don’t have well-paying factory jobs. They are forced into low-wage jobs cleaning offices, driving taxis or working in fast-food restaurants.

      Unable to make ends meet, these newcomers have swelled the ranks of the working poor and pushed the city’s social services to the brink. The use of food banks in Hamilton has skyrocketed, and homelessness has more than doubled. Hamilton’s inner-city core is among the poorest in the country. In some areas, like Barton Street, two thirds of the residents live below the poverty line. As teenage pregnancy, high-school dropout rates and illiteracy reach critical levels, the city is staring down the intractable barrel of generational poverty.

      “We have been bleeding jobs continuously, and replacement jobs have not been the rewarding ones,” says Marston. “Fifteen years ago people thought the food banks were a temporary institution. Now it’s not just the unemployed who use them, but the working poor— they can’t make it.”

      From the looks of things, the situation isn’t going to improve soon. A quick perusal of the city’s top fifteen employers shows that the overwhelming majority of jobs — three quarters of them — are in the public sector, either in hospitals or schools or in the municipal, provincial or federal governments. Outside the two steel companies, there is scant evidence of any real wealth creation. According to Paul Johnson, director of the city’s recently created poverty task force, some of the biggest job growth has been among welfare support services and, of course, Tim Hortons, which now has more than four hundred employees in the city.

      “We are just buying time,” says Johnson. “What happens to Hamilton when another recession hits? We’re treading water, and yet we’re in the best economic times we can remember. The only thing we know for sure is, it will come to an end.”

       CHINA CHANGES THE WORLD

      Bolton is not far from Hamilton, maybe fifty kilometres north, one more watermark in the sprawl of featureless highways and cookie-cutter housing developments that ooze from Toronto like an oil spill that can’t be contained. Once an expanse of farmers’ fields, this suburban enclave is home to Husky Injection Molding Systems, the biggest game in town and a rare gem among the sparsely populated ranks of homegrown manufacturers.

      Tucked in behind a thick wall of vegetation, Husky’s leafy compound couldn’t be more different from the heaving industrial miasma of Hamilton. To encourage environmentalism as well as efficiency, the company provides a fleet of yellow bicycles to commute between each of its well-manicured manufacturing complexes. Instead of entering a stuffy boardroom, visitors are led into the “Imagineering Room,” a bright, sky-lit space, adorned with woodsy paintings and country-style furniture meant to encourage creative thinking.

      The architect of this carefully constructed sanctuary is Robert Schad, a German-born entrepreneur who came to Canada in 1951 to escape war-ravaged Europe. A toolmaker by trade, Schad turned his garage tinkering into a world-beating company. Husky is the leading manufacturer of high-end equipment used to make plastic mouldings for everything from pop bottles to auto parts. With sales of more than $1 billion, Husky has offices in almost thirty countries and factories in Canada, Luxembourg and Shanghai.

      But while Schad built his empire on an unflagging credo of “automate or die,” a recent trip to China convinced him that that credo is not nearly merciless enough. “China changes the whole world. The drive for speed, the quick decision-making, it’s really a very ruthless business approach,” he said during an interview in the Imagineering Room before retiring as Husky’s chief executive officer in 2005. “If you don’t compete in China, you will not compete globally. It’s a benchmark now of global competition.”

      Convinced of China’s pre-eminence, Schad pulled his twelve-year-old son out of Toronto’s prestigious Upper Canada College so that he could be home-schooled in Mandarin. Yet, despite Husky’s international reach and its reputation as the Cadillac of its class, the company’s revenue plunged 15 per cent in 2004.³¹ Schad admits that Husky will be able to maintain its technological leadership “only for so long.”

      With the company’s carefully tended garden ruffled by the rumble of competition half a world away, the salad days of after-work massages, a company fitness facility and a daycare centre are numbered, warned Schad. “There’s a certain entitlement attitude here. We’re going to close some things down, make it tougher,” he said of plans to introduce rigorous performance evaluations. “We can’t afford to live in an oasis here and let things go by. We have to compete.”

      What Schad is up against is a daunting combination of technology, transportation and hundreds of millions of hard-driven people willing to work twelve hours a day, six days a week, assembling everything from toys to televisions for pennies an hour. The promise of low-cost production and global reach has lured the world’s leading multinationals to China’s shores while awakening the Middle Kingdom to its own global aspirations.

      The one-time sleeping giant is now flexing its muscle, building homegrown multinationals like Huawei Technologies, an electronics equipment maker, which can afford to employ thirteen thousand highly educated Chinese engineers, roughly equivalent to Nortel Corp.’s own r&d staff, but paid one third the salary. The company, which didn’t exist before 1988, is scooping up multi-million-dollar supply contracts from Oman to Brazil and has quintupled in size since posting sales of us$1.8 billion in 2000. In 2005, Huawei racked up revenues of us$8.2 billion, including us$4.8 billion in exports, and at its current rate of growth is on track to surpass the once mighty Nortel in a matter of years.*

      This new template, being forged by the likes of Huawei, Gerdau and Mittal, turns on its head the groundings of much of the world’s economic compass. It redefines the concept of what is a commodity, reconfigures global trade patterns, blows away comparative advantage and defies the idea that proximity to market, a long-cherished Canadian advantage, matters. “The world is small and the world is flat,” says Jack Gin, chief executive of Vancouver-based Extreme CCTV , which exports surveillance cameras around the world. “It’s scary. It’s scary if you’ve got kids.”

      The future, many believe, is looking decidedly grim for Canada, still sleepily ensconced in its makeshift domestic haven. Branding itself as the world’s cheapest industrialized country,³² Canada has opted to compete as a low-wage alternative to the United States, instead of capitalizing on scale, scope or innovation. As a result, all its advantages — from its cherished car industry to its storied natural resources — are now in the direct line of fire from China and other ambitious upstarts such as Mexico, Brazil and India.

      Take the $100 billion automotive sector, the bread and butter of Canadian industry. The Big Three vehicle manufacturers, General Motors (GM), Ford, and DaimlerChrysler, on which the Canadian industry overwhelmingly depends, have been hemorrhaging money and jobs in recent years as they struggle to compete against more popular imports and more efficient rivals. But while massive plant closures and job cuts were announced in the United States and Canada in 2005 and 2006, China is attracting investment by the buckets— including from GM , which admitted that its Chinese unit was the only bright spot on the company balance sheet. China, a nation that once produced fewer cars than Australia, is expected to account for half of all new global vehicle-making capacity in the coming years. Already ahead of Canada, which since 1999 has slid from being the world’s fourth-largest vehicle producer to the eighth spot today, China is set to overtake Japan as the globe’s number two manufacturer by 2010.

      The vehicle makers, along with a host of upstart domestic manufacturers, are drawn not only by the hundreds of millions of carless Chinese but by the country’s potential as a global export base. In 2005, Honda delivered its first made-in-China cars to Germany. DaimlerChrysler quickly followed suit, inking a joint venture with