State of the Nation, Spring 2010

As goes Europe, so goes Canada

We have our own version of Greece. It’s called Quebec 


Events this winter did not cast a flattering light on the people of Greece. The whole world watched as they rioted and struck against government cutbacks, while harder-working northern European nations struggled to backstop Greek government debt, to stave off continental fi scal ruin. Greeks work less than northern Europeans, hide more income, demand more government services, and retire earlier. Greek governments borrow more heavily against the national income, and in the past have concealed spending and debt from the European Commission. When German, Dutch and Swiss bankers demand that the Greeks start living within their means, they erupt in a national tantrum. Riots break out and Greece’s huge civil service and major unions go on strike, becoming even less productive than usual.

Such adolescent irresponsibility, while not admirable, is understandable. Life in Greece has been good. Through government borrowing, Greeks enjoy a higher standard of living than they ever had before, and (not with standing the movie My Big Fat Greek Wedding) they don’t spend it much on kids; their birthrate is so low (1.36 children per woman) that their language, culture and ethnicity are steadily vanishing.

It is unnecessary to ask whether this cultural suicide is perhaps just as well. Good or bad, it’s what happens to societies which lose their will to exist –even the cradle of democracy. Similar habits and attitudes pervade Mediterranean culture.

It was still uncertain as this was written if a bailout would proceed, much less succeed. If it fails, Europe’s economic union could very well fail too, taking withit the trade advantage upon which its quarrelling members depend to compete with North America and Asia.

If the Union reverts to 27 self-protected countries, all with aging and imploding populations, each responsible for its own foreign trade, border security and immigration, the common market will soon become a common disaster. But on the other hand, if the bailout succeeds, it will allow Mediterranean Europe – and not just Greece -- to go on forever pretending it is a viable contributing region when it is really a self-indulgent drag on the EU, in an increasingly demanding global economy.

Here at the Citizens Centre, we do not concern ourselves with Europe. We mention this only because we Canadians have our own version of Greece, namely Quebec.

Longer-term, Quebec is a worse political partner than Greece

Quebec has many charms, but it has a dark and cynical side as well. It is where students and unions strike for no good reason, where hyper sensitive linguistic nationalists routinely intimidate minorities into silence, where badly built overpasses unexpectedly collapse, andwhere women don’t have children unless the government provides virtually free daycare.

As in Greece, Quebec taxes are so high, and there is such widespread evasion combined with implacable demand for services and subsidies, that the government has borrowed heavily over many years, leaving itself squeezed like Greece between rising debt and inflated public expectations.

But in one key respect Canada’s Quebec problem is actually much worse than Europe’s. European Union members still pay their own internal social costs. Northern Europe’s complaint is that Greece and other EU members are borrowing too much, weakening Europe’s common currency and credit rating.

Quebec has done even worse damage to Canada, and for many decades. But what is even more damaging to Canada, in addition to weakening the dollar and forcing up interest rates, Quebec (along with several other uncompetitive provinces) enjoys constitutional and statutory rights to large federal cash transfers, mainly from Ontario and Alberta. This does not happen in Europeon anything close to the same scale.

On a net-dollar basis, the federal system removed an estimated $21 billion from Alberta last year, and a similar sum from Ontario – even though Ontario, pulverized by recession and bad management, qualified for a small federal Equalization payment.In net federal cash flow, Ontario remains amassive contributor to the less productive provinces, principally Quebec.

Quebec is mired in debt 

When times are good – when money is cheap and jobs are plentiful – few voters worry about government borrowing. Only when things deteriorate does it really matter, and then it’s too late.

That’s how Quebec ended up with the fifth-most indebted government in the developed world. Only Greece, Italy, Iceland and Japan are further in the red.

A special Quebec Ministry of Finance report disclosed in February that, after adding in its percentage share of federal debt based on population, Quebec’s total debt now amounts to 94% of its GDP (thevalue of all Quebec goods and services producedin a year). Greece’s debt is 102% of GDP, Italy’s 114%. Japan’s is out of sight.

Here at home, Quebec is far more indebted than any other Canadian province,even in the Atlantic region. Quebec’s provincial debt (excluding its federal share) is 50% of its own GDP, followed by NovaScotia (35%), Newfoundland (31%), and Ontario (30%). Ottawa’s debt is 44% of Canadian GDP, down from 68% in 1996.

Quebec’s borrowing is a problem for allCanadians, because international lendersand credit agencies look at both levels ofgovernment together, so bad behaviour byone affects all the rest. But that is the leastof the problem. The federal fi scal tranfersit gets each year are an even greater burdenon the national economy.

Although Quebec is beginning to talk about dealing with its spending problem, other Canadians should hold their applause. There are only two ways Quebec can close its gaping provincial deficit and reduce its debt. It can ask its own residents to pay more (in taxes or privatized services), or it can demand more transfers from other regions – from all those of us whom Quebecers usually lump together as“les Anglais.”

Fifty years of experience should tell us which course they are likelier to rely on more, restraint or complaint.

Sovereignty referendum 3 begins now 

Pressure for an independent nation of Quebec has lasted longer than most Canadians can remember. It seems like forever.

In reality it has been around for only half a century. For most of the two centuries before that, following the Conquest in 1759, Quebec was quiescent, if not always blissfully content. There were occasional internal struggles, but only since the Quiet Revolution circa 1960 has there been a determined and sustained drive for sovereignty.

The reasons it began when it did are complex. The significant point is that it shows no sign of going away.

Twice – once in 1980, and again in1995 – sovereigntist governments put an independence question to the people, and twice the francophone majority supported it.

Both times, the francophone minority combined with the almost unanimous vote of all non-francophones managed to block it, winning round two by less than 1%. For that reason the government of Quebec has implemented policies calculated to subsume the English minority or push it out, while at the same time wresting as much out side financial support (“booty” was premier Duplessis’s term long ago) as Ottawa can be persuaded to pay.

After both referendums, Canadians hoped that “separatism” would disappear, but it did not. It merely subsided for a time. Both times the Parti Quebecois was re-elected afterward by a wide margin, on this assurance from then-premier Lucien Bouchard in a 1998 leaders’ debate: “When a sovereigntist government is re-elected,there is leverage for further gains.”

Such “gains” have not reduced poverty, increased productivity, or inspired gratitude, but as politicians look at life, they are “gains” nonetheless. Money is power.

The only hopeful sign of change was the emergence in the 1990s of the Action Democratique party, a free market amalgam of younger Quebecers who wanted to somehow transcend the endless stalemate between federalists pursuing what premier Bourassa called “federalism for profit,” and what separatists call “knife at the throat federalism” for “leverage.”

After a long and uncertain incubation the ADQ rose to second place in 2007and promptly fell apart. It failed to change the political script and Quebec is back to the familiar duopoly.

A rational person would say that witha global credit crisis washing over the world, and Quebec up to its neck in debt, now would seem an unlikely time for the sovereignty cause to rise a new. But Quebec sovereignty is not rational and they would be wrong. Sovereignty is the institutionalized passion of hyperventilating students and powerful entitlement-driven unions. These forces are all still in place.



Referendum 3 starts today – not because independence makes sense right now, but because Canada is vulnerable to another round of “leverage.” Quebec will either get even more federal money, or add yet-another grievance to the sovereignty arsenal. Either way, it wins.

From its beginning in the 1960s, the Quebec sovereignty movement has fuelled itself on grievances, more imagined than real.

When the economy improves, sovereigntists will want to be able toremind Quebec that back in the terrible credit crunch of 2010 – in their most dire hour of need – Ottawa abandoned them to the grasping cutback demands of global bankers rather than equitably sharing with Quebec the resources of rich Ontario and even richer Alberta.

So get set for Referendum 3, Act 1:“Great Expectations.”

 Next time, a national referendum

It is probably impossible to tally accurately the long-term cost of Quebec to the Canadian economy. All we know is that it is staggering.

Add together the forty-year cost of official bilingualism at three levels of government and all through the private sector – a figure unknown because Ottawa does not want to know it. Add as well the net shift of federal appeasement dollars into Quebec from Ontario and Alberta, now amounting to – on an educated guess – some $20 billion annually. Add the cost of national uncertainty to our national currency and credit caused by two independence referendums, with more to come.

If over the past half century this bill hasn’t reached one trillion dollars we’d be, well, surprised.

Last, add the political and constitutional cost of the endless bicultural bickering and paralysis based on the bizarre demand that we think of Quebec as half the country.

How long can this continue?

It has dragged on for half a century for a simple reason – the referendum cards are all with Quebec.

In a free country, especially a free federation, people are allowed to speak and vote as they wish. We cannot force Quebec to vote federalist. We can’t force them to be grateful. We cannot prevent them from holding referendums whenever it suits them.

But rights are mutual or they are not rights at all.

If Quebec has the right to leave Canada, Canada has an equal right to leave Quebec.

There should be a federal law – perhap seven a constitutional amendment– that whenever a province votes to negotiate disassociating from Canada, all Canadians will vote on the sameday whether to disassociate from that province. Let’s make it real.

Under this legal arrangement, even if a third Quebec referendum is to occur, given how exasperated Canadians have become there will never be a fourth. If Quebec did not vote to leave on its own steam, it would be told to leave by an enraged Canadian people.

Either way, the long melodrama would end.

 Look not to Parliament, but to the new parties of the West

Would Parliament ever pass a law saying if Quebec decides to vote on independence,we all get to vote?

Not without help. No national party will initiate such legislation as long as Quebec occupies almost one-quarter of the Lower House.

Every national party is in conflict of interest when it comes to dealing with Quebec. However, as we saw with the evolution of the Clarity Act and with the Charlottetown Accord referendum, nationally-significant decisions begin most often in the regions, and Parliament responds to the pressure.

For example, the Clarity Act, setting rules for the first time on how provinces may secede, began when the western Reform Party, with nothing to lose in Quebec, introduced a Quebec Contingency Act in 1996. The Chretien Liberals denounced it and then copied it as the Clarity Act, which passed in 2000.

The national referendum which defeated the Mulroney government’s Charlottetown constitutional deal took place only because Quebec, Alberta and B.C., under public pressure, allowed provincial referendums, pressuring Mulroney to hold a national one.

In this respect, Canada’s constitutional assumptions have changed. The public now expects to vote directly on major constitutional change. And what could be more constitutionally significant than Quebec holding the federation to ransom with yet another sovereignty vote?

Granted, even provincial governments would view with trepidation the idea of voting to tell Quebec to leave Canada. It’s not an idea traditional governing parties would seize with enthusiasm and resolve. But there is something eminently fair about giving all Canadians a vote on so weighty a matter, in hopes of finally settling the matter.

There are new populist parties in the West– the governing Saskatchewan Party and the surging Wildrose Alliance in Alberta –which could probably be persuaded, because they see that the cost of buying Quebec’s loyalty is bleeding the country to death. The people themselves see this, and a national referendum initiative starting in the prairies could quickly spread into B.C. and Ontario.

There is today widespread media awareness and commentary that 20th century “fiscal federalism” (aka “national sharing”) is bad for the country – bad for productivity and bad for unity. We can’t afford the cost and won’t survive the effects.

However, it’s one thing to identify an economic problem and another to find apolitical solution.

Solutions begin with organizations like the Citizens Centre developing new ideas for new political parties like the Wildrose.

Rarely do solutions begin in Parliament. This one certainly won’t.