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Notes for an address on the
Economy and National Unity
Horizon 2000
Halifax, Nova Scotia
May 3, 1996
Ladies and gentlemen, it is a pleasure to be with you here today in Halifax.
Each of you are aware of how close we came to putting Canada at risk on
October 30th of last year. In light of the result of the Quebec referendum, I am
sure you will all agree that the possibility of Canada's breaking up must be
taken very seriously.
Yesterday, I had a meeting with Premier Savage and we had a good discussion
about where Canada is heading. Canada is in need of change. That is perhaps the
one thing all Canadians can agree on.
I am pleased to be speaking in Nova Scotia. This is a province that knows a
thing or two about secessionists. But despite the best efforts of Joseph Howe,
Nova Scotia has been a proud and active participant in the Canadian federation
for many years. Perhaps Mr. Bouchard should take note.
Secession is a grave decision, and it is so rare under normal circumstances
that it has never happened in established democracies that have had at least ten
consecutive years of universal suffrage. We must deal decisively with this
situation to ensure that a nation as great as Canada is not lost.
The constitutional debate is beginning to weigh heavily on the mood of all
Canadians. Some are saying openly that they are tired, that they've had enough.
Others have simply resigned themselves, and have the impression that Quebec's
secession may be inevitable.
It is thus imperative to shake off the prevailing climate of defeatism and
anxiety in Canada. We must awaken hope. Indeed, the reason I entered active
politics was to combat negativism. That is my first objective.
I. CANADA: AN ECONOMIC FORCE
The continuing talk of secession is having a direct impact on Canada's
economic performance. The link between the economic situation and the danger of
secession is obvious. Talking about the Canadian economy also means talking
about the danger of secession.
Even Mr. Bouchard, in his own words, has admitted as much. He said "...I
won't deny that there may be some foreign investors who are saying "well,
let's wait until things are settled between Montreal and Quebec City before
going into Montreal." (Radio-Canada, LE POINT, Thursday, March 21, 1996).
But Mr. Bouchard, as Pequistes often do, is only seeing part of the story.
This continuing turmoil affects the economy not only in Montreal, or Lac
Saint-Jean for that matter, but also in Sydney and Yarmouth and all points in
between. Numerous studies conducted by the prominent economists Marcel
Côté and John McCallum, the Business Council for National Issues, the C.D.
Howe Institute, the Economic Council of Canada, the Royal Bank of Canada and the
Fraser Institute have all concluded that Quebec's secession would have severe
repercussions on our economy, both in Quebec and in other parts of the country.
These repercussions include :
- slower economic growth;
- higher interest rates;
- unstable currency;
- higher inflation;
- possible disruptions or barriers to transport and communication;
- a possible increase in interprovincial trade barriers.
Nothing better illustrates the economic price we all have to pay for our
unity crisis than a recent report from Moody's bond rating agency. The report
recognizes the government's effort to reduce the debt, put public finances in
order and restore investors' confidence in the Canadian market. However, and
despite these positive developments, the bond rating firm has ruled out an early
restoration of Canada's triple-A credit rating, noting that the political
uncertainty caused by the threat of another referendum is a major roadblock. As
you are fully aware, a lower credit rating means higher interest rates and,
ultimately, slower economic growth and job creation.
Many of you are businesspeople. You are in a good position to assess the
considerable impact of Quebec's separation on its economy and that of the
country as a whole.
You are aware of that because you know what the Canadian economic union
represents. You know its strength and, above all, you do not underestimate its
potential.
You know that Canada is the seventh largest industrialized economy in the
world and thus one of the world's strongest economic powers.
You also know that, in the past thirty years, Canada has been number one
among the G-7 countries in terms of employment growth, and number two in terms
of economic growth. Canadians have the 6th highest standard of living in the
world in terms of per-capita income. (Economic surveys, OECD, 1995).
Our life expectancy is among the highest in the world and Canada is number
one in terms of the school attendance rate.
Furthermore, and this is something few people know, Canada leads the G-7
countries and is second place in the OECD (behind Sweden) in terms of the lowest
long-term unemployment rate, meaning unemployment lasting longer than 12 months.
Of course, our federal system is not perfect. We still have too many people
unemployed or living below the level of poverty and we must do something about
it. But when we compare ourselves to other rich countries around the globe, we
realize the extent to which Canada's performance is enviable.
The Canadian economic and social union is a powerhouse that benefits every
province and whose relevance is more than obvious in light of economic
globalization.
II. WHY FEDERALISM IS THE SOLUTION
Canada's excellent performance is not just an accident. Our federal system
has something to do with it.
Four of the five richest countries in the world are federations: Canada, the
United States, Germany and Switzerland. Again, it cannot just be an accident.
I believe that federalism has helped Canada to prosper first and foremost
because it is a flexible and dynamic system that has struck the right balance
between two fundamental principles: solidarity and diversity.
Canada has attained a level of democracy, freedom, fairness and prosperity
that is almost unequalled in the world, in large part because we Canadians have
been intelligent enough to develop a way of practising federalism that well
reflects the ideals of solidarity and respect for diversity.
First of all, we have put in place a network of social programs and a system
of equalization payments so that all citizens can have a comparable level of
well-being. We have even entrenched that principle of equalization in section 36
of the Constitution Act, 1982. That commitment to social solidarity is
unparalleled in the world and its results are impressive.
Over the last thirty years, the gap between the richer and the poorer
provinces has narrowed considerably. During that period, the seven provinces
benefitting from equalization payments have seen their per capita GDP rise
faster than that of the three richest provinces. (Helliwell, John, F.,
"Convergence and Migration among Provinces", Canadian Journal of
Economics, April 1996)
Second, the constitutional division of powers, which gives the provinces
exclusive jurisdiction over such key areas as health, education, natural
resources and welfare, illustrates our commitment to extensive local autonomy.
Indeed, in terms of both sectoral powers and taxing and spending powers,
Canada's provinces are in many ways stronger than the American states, the
German Länder or even the Swiss cantons.
When I talk about the types of advantages that federalism gives Canada, I am
not talking only to Quebecers who might be tempted by the sirens of secession. I
am also talking to those who feel that our country is over-governed and who
dream of a unitary Canada.
Centralizing powers to a national government is not the solution. Imagine for
a moment the bureaucratic monster we would have to put in place if we had only
one ministry of education to administer every school in the country, from St.
John's to Victoria.
The strengths of our federal system have served us well so far and will
continue to do so more than ever in the coming years, if we give them the
chance.
Throughout the world, we see countries and supranational organizations such
as the European Union trying to strike a balance between solidarity and
autonomy. In that regard, Canadian federalism has a lot to teach the rest of the
world in terms of how to balance those principles.
As President Clinton put it eloquently : "In a world darkened by ethnic
conflicts that literally tear nations apart, Canada has stood for all of us as a
model of how people of different cultures can live and work together, in peace,
prosperity and understanding. (...) Canada has shown the world how to balance
freedom with compassion." (Bill Clinton, Speech in the House of Commons,
Ottawa, February 23, 1995)
I am confident that our federal union will also help us to take on the new
global challenges for which the balance between solidarity and diversity is more
essential than ever.
Because of economic globalization, more and more decisions with major
repercussions on Canadians' lives are being made at the international level.
Belonging to the G-7, NAFTA, the Commonwealth, the Francophonie, the
Organization of American States and the Asia Pacific Economic Cooperation
Council is a considerable asset for Canadians in defending their interests
internationally. Without the federal union, we would lose a number of those
assets.
On the other hand, trade liberalization at the international level favours
specialization of regional economies. The Canadian federation's characteristic
respect for diversity and regional autonomy will also serve us well in that
regard.
In social terms, a number of relatively new phenomena are helping to
transform the challenges facing Canada. An aging population, growing numbers of
single-parent families, diminished job security and a growing proportion of
citizens who depend on income security programs are issues that concern all
Canadians and are making us rethink our social protection system.
Once again, the core principles of our federation will prove to be invaluable
advantages. On the one hand, the extensive autonomy the provinces have with
regard to social policy will help them find innovative solutions tailored to
their specific needs. On the other hand, Canadian solidarity will ensure that
all citizens, no matter what region of the country they live in, will have
access to a comparable level of services.
III. WHAT DO WE NEED TO DO NOW?
In my meetings with the Atlantic premiers, I have learned one thing for
certain: as much as anyone in this country, Atlantic Canadians seek change.
The time has come to act. The government pursues three main objectives:
first, to debunk the myths propagated by the secessionists; second, to awaken
the Canadian identity that is dormant among not only many Quebecers but also
among other Canadians; and finally, to make the Canadian federation more
harmonious and more acceptable to everyone, including Francophone Quebecers.
A. Myths
Over the past decade, those who believe in Canadian federalism, including
myself, have not always made the necessary effort to explain the advantages of
our system to Canadians. By leaving the field open to our opponents, we have let
a number of myths and falsehoods about our federation take root in public
opinion.
I'd like to take a few minutes to take a closer look at some of the main
criticisms made about our federation.
Is Canada really over-bureaucratized and over-governed?
If our system of government were truly cumbersome and inefficient, our public
spending, our tax burden and the size of our public sector, including all levels
of government, would be higher than in other comparable countries, particularly
unitary countries. And yet that is not the case.
When compared with the average among the OECD countries, total government
spending, the size of the public sector and the tax burden in Canada are not
particularly high. In fact our performance is much better than many unitary
countries in the OECD, such as France, Italy, Norway, Denmark and Sweden.
Is Canadian federalism truly an adversarial system where everything is
subject to endless squabbling between Ottawa and the provinces?
Although disagreements between the federal government and the provinces often
get a lot of press, it should not be concluded that our federation is plagued by
disagreement and conflict. Many issues are resolved every day without attracting
any media attention.
The most recent Inventory of Federal-Provincial Programs and Activities,
which came out last year, contains no fewer than 457 bilateral and multilateral
programs or agreements between Ottawa and the provinces. That means clearly that
the federal government and the provinces are managing to get along and
co-ordinate their activities in a host of areas.
Moreover, our government has taken various measures to foster a renewed
partnership with the provinces:
- the Canada Health and Social Transfer;
- the National Infrastructure Program;
- "Team Canada's" trade missions;
- the Employment Insurance Reform, particularly Part II of the bill on active
employment assistance measures; and finally
- limitation of federal spending power in areas of exclusive provincial
jurisdiction.
Is Canadian federalism really a gridlocked system that cannot be reformed?
The experience of recent decades shows that the small number of
constitutional changes has not prevented the federation from evolving
considerably on all fronts.
Let's take the example of the Program Review headed by my colleague Marcel
Massé. That exercise has already yielded impressive results, making it possible
to rebalance responsibilities among the federal government, the provinces and
the private sector. Unfortunately, those achievements have too often gone
unsung.
The Program Review will allow the Government to save some $19.2 billion by
1998-99 and cut more than 45,000 positions from the federal public service, a
reduction of almost 20%.
Our federal system has not evolved so substantially through greater
centralization of decision-making in Ottawa. The trend is clearly toward greater
decentralization.
Over the past four decades, we have seen a gradual and remarkable
redistribution of the federal government's taxing and spending power to the
provincial governments. For example, federal program spending was one and a half
times the size of provincial and municipal spending in the 1950s. In 1990, it
was only three quarters their size, and that proportion will drop to two thirds
by 1996.
Would the recognition of Quebec as a distinct society give a "special
status"to this province?
The fear by some of recognizing Quebec as a distinct society is yet another
Canadian myth. This phrase merely acknowledges a simple fact: Quebec has a
primary language, culture, and legal system which differ from those in the rest
of Canada. Stating it in the Constitution simply does not give Quebec any
special powers.
When I say there are some myths that need to be debunked, I do not deny that
there are also some improvements that need to be made. But we must guard against
the knee-jerk reactions that get the better of us when Ottawa-bashing replaces
hockey as our national sport.
B. Awakening Canadians' sense of identity
As the Prime Minister of Canada indicated during the referendum campaign, we
must no longer take our country for granted. The referendum also showed us that
economic arguments are not enough. We have to speak from the heart.
As a government and people we must be more positive and stop giving Mr.
Bouchard a monopoly on the great values of solidarity and pride.
But I have learned that the rest of Canada could take a lesson from the
Atlantic provinces. Seldom have I encountered people who have such a profound
sense of place and respect for their own heritage. And now through a renaissance
of the region's music and arts the rest of Canada has discovered what the
Atlantic has to offer.
And then, of course, there is the famous Atlantic Canadian sense of humour. I
learned of it firsthand from the TV show"This hour has 22 minutes". A
few weeks ago it explained all of Canada's problems. They started when McKenzie
King appointed Pearson who in turn appointed Trudeau who so angered Quebecers
that they helped elect Mulroney who appointed Bouchard who made way for
Chrétien who appointed the "two wise guys" Mr. Pettigrew and me. This
show has done the work of a thousand politicians and academics and diluted
Canada's troubles down to a simple fact: It's all McKenzie King's fault.
From coast to coast to coast, respect for democracy and freedom, tolerance of
others, generosity and sharing are values that unite us all and reflect what we
are. We should be proud of Canada's history and prouder still of our future
potential.
C. Changes for a more harmonious federation
It is clear that we need a more harmonious federation. We must find better
ways of achieving our common goals and ideals than, for example, imposing rules
on the provinces by attaching conditions to federal spending.
We need to find ways of co-operating better to protect our gains and take on
the challenges facing us.
We all agree that changes are needed. The Prime Minister made a commitment
during the referendum campaign to bring about those kinds of changes.
And that is precisely what the Government of Canada is proposing to do in its
Speech from the Throne. For example:
- The Government of Canada is committed to not using its spending power to
create new shared-cost programs in areas of exclusive provincial jurisdiction
without the consent of a majority of the provinces. Any new programs will be
designed so that provinces that opt out will be compensated, provided they
implement a comparable program.
This is the first time in our history that a federal government is taking the
initiative and unilaterally agreeing to this repeated demand by the provinces,
outside the context of official constitutional negotiations.
- Furthermore, the Government of Canada does not need to be present in some
sectors. We are prepared to withdraw from areas such as labour-market training,
forestry, mining and recreation, which are responsibilities better suited to the
provinces and other bodies.
- We will work together with the provinces to ensure the viability of our
social security system. We are willing to explore new decision-making formulas
in the area of social policy.
- We will continue the work under way to reduce barriers to internal trade
and labour mobility, while still playing a key role in promoting the Canadian
economic union.
- To eliminate costly and unnecessary duplication and favour economies of
scale, we propose to work with the provinces to establish a Canadian securities
commission, a unified food inspection system and a national tax collection body.
- We are also committed to entrenching in the Canadian Constitution regional
vetoes and recognition of Quebec as a distinct society within Canada.
CONCLUSION
Reconciliation and solidarity must guide us in our quest for a strong, modern
and united Canada. We must not take our country for granted.
We can and will make the changes that will lead us to an even better country,
a Canada where all Canadians will feel at home from coast to coast.
We do not have the right to fail. For if we fail, our legacy to our children
and to the rest of the world will be the end of the Canadian dream.
Check against delivery.
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