"Federalism: A System in Evolution"

Notes for an address to the APEX

Ottawa, Ontario

April 25, 1996

Introduction

Aexis de Tocqueville was a fervent defender of the federal system, which he saw as one of the combinations most favourable to the prosperity and freedom of man. Accordingly, he said, "I envy the lots of those nations which have been able to adopt it."

Well, that act of foresight is testimony to de Tocqueville's reputation as a prophet of democracy. Four of the five wealthiest countries, in terms of per capita GDP, are federations. Canada is one of those countries.

And yet, here at home, we rarely hear people saying good things about our federal system. It is accused of being cumbersome, inefficient and impossible to reform.

Nevertheless, my academic research and my new experience within the Government lead me to conclude that a great deal of the criticism of Canadian federalism is based more on myth than reality.

I would therefore like to take advantage of the forum I have been given here today to try to make an accurate diagnosis of how our federation works. At a time when the unity of Canada is threatened, I believe it is essential that we be able to pinpoint the positive elements of our federal system, as well as the areas where improvements must still be made to serve Canadians better and bolster their confidence in their system of government.

As senior managers in the federal public service, you are directly concerned by these matters. You administer government programs; you must continually do more with less. You know better than anyone what works and what doesn't. You are an indispensable asset for the Government in its efforts to renew our federation. For that reason, I am very grateful to APEX for having invited me to talk about how the federation works.

The advantages of federalism for Canada

I won't be revealing any state secrets if I tell you that Canada's performance in economic and social terms is among the best in the world.

* Year after year, the UN ranks Canada number one in terms of quality of life. * Canadians' life expectancy is among the highest in the world, and Canada is number one in terms of the school attendance rate. * Canada is one of the top five OECD countries in terms of per capita income and per capita GDP. * Between 1960 and 1990, Canada was number two among the G-7 countries in terms of economic growth, and number one in terms of job creation. * Canada leads the G-7 countries and is in second place in the OECD (behind Sweden) in terms of the lowest long-term unemployment rate, meaning unemployment lasting longer than 12 months.

Canada's excellent performance is not just an accident. Our federal system has something to do with it. 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.

Under the principle of solidarity, the government works for the common good of all citizens and all regions, especially those less fortunate. And the principle of diversity leads to the autonomy of local powers, citizens and institutions.

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 practicing 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.

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 importance of debunking 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.

Our public spending is not particularly high when compared with the average among OECD countries. In 1993, for example, total government spending in Canada represented 49.7% of Canada's GDP. This ratio is almost identical in Canada and Germany (49.7% vs 49.4%), and it is higher than Canada's in a number of unitary OECD countries, such as France (54.8%), the Netherlands (55.8%), Italy (56.2%), Norway (57.1%) and Sweden (71.8%).

The size of Canada's public sector is not unusually high, either, when compared with the average among OECD countries. In the early 1990s, public sector employees had 20.6% of the jobs in Canada. That proportion is only slightly higher than that of the United Kingdom (19.4%), and lower than that of France (22.6%), Denmark (30.5%), Sweden (31.9%) and Norway (32%). Need I remind you that all those countries have a unitary structure?

Finally, the tax burden is lighter in Canada than in many OECD countries. In 1993, total revenues collected by the various levels of government represented 42% of Canada's GDP. That ratio was higher than in Canada in 11 of the 19 OECD countries for which data are available.

International comparisons highlight the fact that unitary states are not more effective and efficient than federal systems. For one thing, the characteristic centralization of unitary states makes it necessary to set up an extremely cumbersome bureaucracy within the national government. For another thing, unitary states cannot function either without creating different levels of government administration. Unitary states also have regional and local authorities, the difference being, however, that those authorities have much less autonomy in relation to the central government than do Canada's provinces.

Are jurisdictional duplication and overlap really costing Canadian taxpayers billions of dollars?

Despite international comparisons that are actually to Canada's advantage, many Canadians remain convinced that the federal and provincial governments are duplicating activities in a host of areas. After all, we do have federal and provincial departments of health, the environment, agriculture, natural resources, fisheries and transport.

A number of studies have shown that there is indeed a great deal of jurisdictional overlap between Ottawa and the provinces. For example, Germain Julien and Marcel Proulx, researchers at Quebec's École nationale d'administration publique, have estimated that 60% of federal programs overlap those of the Government of Quebec. A 1991 study by Canada's Treasury Board Secretariat concluded that 66% of federal programs at least partially overlap those of the provinces.

And yet, all the studies on overlap and duplication, including the notorious Le Hir studies by the Government of Quebec, concluded that in the vast majority of cases, federal and provincial activities are complementary rather than redundant. For example, the Government could not withdraw from activities such as management of national parks or correctional services without considerably affecting service to the public.

It is also important to note that overlap is not the exclusive bane of the Canadian federation, or even of federal systems in general. It is an issue that concerns unitary states as well.

I'd like to share an example that was recently brought to my attention. Much has been said lately about duplication of employment assistance measures. The Official Opposition and the Government of Quebec often talk about blunders caused by the approximately one hundred federal and provincial measures currently implemented in Quebec. Incidentally, employment insurance reform is expected to reduce the number of federal measures from 35 to 5.

Well, according to a recent edition of the French magazine L'Express, there are currently some 2,300 different employment assistance measures in France. That plethora of programs is due to the fact that municipalities, departments, regions and the central government all implement their own measures, without paying much heed to what the others are doing already. And to think that some people would have us believe that we're the only ones who have problems with overlap!

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, often at your level, 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 that the federal government and the provinces are managing to get along and co-ordinate their activities in a host of areas.

With your support, our government has taken various measures to promote a renewed partnership with the provinces:

* the Efficiency of the Federation Initiative; * 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; * withdrawal from certain areas of provincial jurisdiction, including labour-market training, social housing, mining, forestry and recreation; 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. A variety of indicators confirm that:

* The number of federal employees in relation to the country's labour force has dropped by almost half since the early 1950s. * In 1950, the federal government collected $3.30 for every dollar of revenue collected by the provinces; in 1993, it collected only $1.20. * In addition, for every dollar spent by the provinces on goods and services, the federal government spent $2.46 in 1960, and only $0.67 in 1993, a drop of 76% in 33 years.

We have thus seen a gradual and remarkable redistribution of the federal government's taxing and spending power to the provincial governments over the past four decades.

As you can see, my assessment of how our federation works is largely positive. Our federal system has allowed us to take on challenges in the past, and I am convinced that it is also the best system to help us take on the challenges that will unfold in the coming years.

Why federalism will help us take on the challenges facing us at the dawn of the 21st century

The strengths of our federal system, namely its flexibility, its dynamism, its solidarity and its ability to respect diversity, 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, and it will help us to take on the new global challenges for which that balance 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.

Furthermore, 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 -- solidarity and local autonomy -- 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.

In addition, federalism fosters emulation among the provinces and the dissemination of productive experiences. Those are key elements for putting in place effective public services.

Canadian society is increasingly bilingual and multicultural:

* Between 1981 and 1991, the number of people who said they had a mother tongue other than English or French rose by 22%, while Canada's population increased by only 13% over the same period. * In addition, the number of people who can speak French has never been as high: according to 1991 census data, 32% of Canadians, or almost 9 million people, are able to express themselves in French. * In Quebec in particular, the French language has continued to flourish. 93.5 per cent of Quebec residents say they can speak French fluently; that is the highest rate of francisation since the beginning of Confederation.

Those indicators reflect our federation's respect for diversity. That principle will enable us to continue to affirm Canadian society's linguistic duality and multicultural nature. By respecting diversity, we will be able to make the Canadian federation evolve in a way that makes Canadians in all parts of the country feel more at home and better recognized.

What will we have to do to improve our federal system?

I am convinced that the federal system will be able to deliver the goods if we continue to rely on those things that make it strong: solidarity and diversity. In practical terms, we will have to focus our efforts on three tasks.

First, we must continue our efforts to make our federation more efficient.

We can better clarify the roles and responsibilities of the federal government and the provinces, especially in areas of shared jurisdiction such as the environment and agriculture. That clarification will yield both greater accountability and greater efficiency.

In trying to minimize unnecessary overlap, our challenge also lies in effectively managing overlap that is inevitable. We must ensure first that the activities of the different levels of government complement one another well, and second that there is productive co-operation between the different governments.

Second, we have to try to make our federation work more harmoniously.

Because the federal government and the provinces share areas of activity, good co-operation is essential. In areas where overlap is inevitable, unilateral action is not desirable. In most cases, it can create conflict, duplication and contradictions between federal and provincial policies.

For effective co-ordination of federal and provincial efforts, we must work in partnership. That's true for us as elected representatives and it's also true for you as public servants. By working together with the provinces, we will succeed in serving the public better, making our federation work more harmoniously and, ultimately, strengthening national unity.

For that reason, I feel it is essential that, before they are implemented, all new federal policies and programs take into account the federal-provincial dimension and the need for a more harmonious federation. Decisions that might affect provincial governments' operations should ideally be made together with the provinces. I can only encourage you to make co-operation with the provinces one of your main criteria for excellence as senior managers in the federal public service.

Third, and finally, to come back to my first point, we have to debunk the far too many myths circulating about our federation and how it works. As federal public servants, you have a key role to play in giving back our fellow citizens confidence in their institutions.

You have the responsibility, which you share with the members of the Government, to explain well to Canadians what the Government of Canada is doing. As public servants, your responsibility is to clearly explain the programs, services and activities you manage and to set the record straight about them if need be.

To be able to make an accurate judgement about their system of government and their institutions, Canadians have to have balanced information. Too often in the past decade, they have been given only one side of the story.

Our federation certainly has its problems, as do all countries; in addition, its unity is threatened. It is thus high time to underscore the federation's tremendous achievements in terms of democratic and individual rights, freedom, social solidarity, economic prosperity and respect for diversity.

Canada has considerable assets to maintain its privileged place among the nations of the world. Our federal system is undeniably one of those assets. Let's make sure we know how to put them to good use and make them work better.

Let's make an accurate diagnosis of our federation, so that we can prescribe the right course of treatment for it.

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