Many of our problems begin with the federal government which now dominates the confederated colonies that we call Canada. The colonies were patched together for England's benefit but Confederation is supposed to be holy for Canadians and no-one outside Quebec is allowed to question it -- but why not?
In feudal times the common people were expected to be loyal to their king and their lords, but the king and the lords were not often loyal to the people. Now the federal government would like to claim my loyalty but I see no evidence that federal politicians and civil servants are loyal to me or to other Canadians. As a Canadian I owe my loyalty to my fellow Canadians, not to a government that takes my money to give to its supporters and to pay politicians and civil servants the kind of salary and benefits that most of us can't have.
It was by taking our money that the federal government gained more power than the fathers of Confederation intended it to have. Federal taxes rake in more money than even the federal government can spend by itself, so the feds pass some of the take along to the provinces in the process they call "re-distribution." In a further re-distribution municipalities get up to half of their revenue from provincial governments.
The excuse for federal taxation and re-distribution is that it is supposed to ensure that Canadians everywhere get the same level of public service. It does improve services in some areas, but the more important effect is that it makes the provinces dependent on the federal government and municipalities dependent on the provinces. That's good for the senior governments because it gives them power, but it's bad for Canada because it encourages waste.
If all taxes were spent by the government that collected them citizens could hold each level of government responsible, and we could expect civil servants and politicians to try to get the best value for each dollar.
But with re-distribution one government collects money that it does not spend and others spend money they do not collect. If municipal governments could save money for their taxpayers by being more efficient they would have a reason to be efficient, but that's not the case. The federal and provincial governments are going to collect taxes anyway and common sense demands that local governments claim and spend all the federal and provincial money they can, even for projects that are obviously wasteful.
Suppose someone in Toronto gets the idea to dig the world's deepest hole, as a tourist attraction. It will cost a billion dollars and be of no use to anyone so no responsible city council would spend city money on it -- but what if they can dig it with federal or provincial money?
The money will be taken from the citizens anyway and it will be spent somewhere, so the question for city council is whether it will be spent in Toronto or somewhere else. Even though the money will be wasted, it's better to have it wasted in Toronto than elsewhere so City Council will approve the hole. It will be a waste, but it will create jobs.
This example is intended to be ridiculous but sometimes fiction is hard-pressed to keep up with reality. In the winter of 1995-96 the federal government offered grants to help municipalities develop "infrastructure."
Some infrastructure is cost goods but roads, bridges, power grids, sewers, water lines and other useful systems make us more productive and lower our cost of living, and thus qualify as benefit goods.
And we certainly need useful infrastructure. Ontario needed the Highway 407 bypass around Toronto so much that a socialist provincial government begged private investors to build it as a toll road.
Any municipality in Canada could put a federal infrastructure grant to good use but the infrastructure grants the feds offered in the winter of 1995-96 were not intended for good use. The feds insisted that they could not be used for works already planned, so the money could be used only for projects that no-one had seen any need for.
That was dumb because any responsible organization makes some kind of plan for everything it really needs, whether it has the money to build it or not. Because the new "infrastructure" grants could be used only for projects that had not entered the planning stage, municipalities had to shelve projects they really needed and find new ones to benefit from the federal "giveaway."
The City of North York spent $31 million dollars to build courts on which to play an Italian bowling game called bocce, and Edmonton spent $10 million to put luxury boxes in sports arenas. The city of Shelburne Nova Scotia needed a municipal water system but it got underground wiring. Lunenburg needs sewers but it got a golf course. Montreal spent $9 million for a circus school, Toronto spent $180 million on a "trade center," Hamilton spent $12 million on a museum that displays old military aircraft and Mississauga spent $55 million on a "living arts center."
Interviewed on TV, North York Mayor (later Toronto Mayor) Mel Lastman said contractors charged premium prices for their work because the federal government was paying most of the bill.
Billions of dollars were wasted, and municipalities were still desperately short of money to pay for infrastructure projects they actually needed.
THE FALLACY OF THE BIG COUNTRY
The supposed advantage of confederation is that it ties ten provinces and two territories together into a single large "nation." That is supposed to give us some kind of economic benefit -- but does it? Around the world some very prosperous countries, including Holland, Japan, Switzerland, Singapore, Hong Kong and others, have very little territory and most counties with big geographic area, like Russia, China, Brazil and India, are poor.
In fact history shows us no large geographic area that has ever become uniformly developed and wealthy with a centralized economy. The one apparent exception to the rule is the United States, but that exception is an illusion.
The United States developed the strongest economy in the world in the 19th and early 20th centuries, with state-chartered banks which could not work across state lines and which, in effect, sub-divided the country into 48 local economies. When a farmer deposited his savings in a local bank in Idaho, for example, the bank had to lend that money within Idaho. Because there was money to loan in every state entrepreneurs could raise capital anywhere in the United States, and major companies developed in every state.
Europe did very well as an amalgam of relatively small economies but now the European Economic Community is trying to form a single big economy and the problems are already showing. Twenty years ago most European countries had labor shortages and they had to import "guest workers" from the middle east and North Africa. Now even Germany has unemployment.
Small countries are easier to manage than big ones, and it may well be impossible to manage a country as big as Canada. In 1867, of course, England did not want Canada to become a developed country. Sir John A. Macdonald was knighted for uniting the colonies in Confederation but knighthoods are granted for services to the British Crown, not to the Canadian people.
England wanted the Canadian colonies to unite because the British Colonial office was afraid we might join the United States. That was a real possibility because many Canadians liked the American idea and historians tell us that, around the time of Confederation, more people moved from Canada to the US than came to Canada from England. Further, England had backed the south in the American Civil War and now she was worried that the North might retaliate by taking Canada.
No one of the five Canadian colonies could support an army big enough to control the colonists or deter the Americans, so the British had to keep their own troops here. If the Canadian colonies confederated they could raise and maintain their own army, and the British armies were stationed here could be brought home.
And England wanted to control the land we now call the Canadian west. It's cut off from Canada's west coast by mountains and from the east by the Canadian shield and geographically it's a natural extension of the American west but if the east and west of Canada were united, they could claim the northern prairies for England.
To be fair, the idea of Confederation looked good in the 1860's. In those days Canada consisted of a few small islands of civilization and a huge hinterland that cost nothing to administer and that could be plundered for natural resources. In the context of the time Confederation made economic sense for the people who lived in the east and plundered the west.
THE BIG PORK BARREL
Confederation also gave the backers of the Canadian Pacific Railway access to a virtually bottomless pork barrel. The CPR got 25 million acres of land as a down payment and, for more than 100 years after Confederation, it was able to tap Canadian taxpayers for unending subsidies. Between them the Canadian Pacific, the Grand Trunk and several smaller railway companies got about 25 per-cent of all the land in the Canadian west.[1] Most of the small railways failed, and their remains were merged into the Canadian National Railway in 1923.
Supporters of the CPR like to pretend that it made Confederation possible because it provided cross-country transportation, but in fact the railway made it impossible for Confederation to work.
Before Confederation the west was a remote and wild land, to be plundered by anyone who could get there, but it was hard to get there and few people came to stay. After the west was settled the needs of people who lived there had to be considered, and they had a lot of problems.
One was the CPR, which held a monopoly on transportation and which charged monopoly rates. The railway held western settlers to ransom until the 1890's, when American railways threatened to move in to new mining districts in the Kootenay Mountains.
Rather than build new lines with its own money the CPR asked for federal aid. In exchange for $3.3 million in cash the railway agreed to hold eastbound rates on wheat and flour and westbound rates on specified "settlers' effects" at the 1897 level forever. The fixed rate made mass settlement of the west possible and the "Crow Rate" was enshrined in Canadian mythology.[2]
The agreement was suspended and the railways allowed to raise rates during the inflation of World War I, and the CPR resisted attempts to re-impose it after 1922. In 1927 the rates for grain and flour were reinstated on all CP lines.
In 1983 the Crow Rate agreement was replaced by the Western Grain Transportation Act which allowed grain shipping prices to increase gradually, and, until 1995, the federal government paid hundreds of millions of dollars to subsidize the shipment of grain.
The railway and the government both pretended that the agreements were for the benefit of Canadian farmers, but in fact they were not. The real purpose of the Crow Rate was to keep the grain in Canada, and to tie Canadian farmers to the Canadian railways and Canadian grain merchants.
Then and now the obvious way to ship grain from the Canadian west to world markets is through the United States, because that's the way the land lies.
To ship grain from the prairies to the west coast you have to haul it over the five ranges of mountains that make up the Western Cordillera. The route to the east crosses about 500 miles of the Canadian shield -- some of the toughest railroading country in the world -- to Thunder Bay. There grain can be stored in winter and shipped by lake freighter in summer to Toronto or Montreal, or it can go on by rail over another 800 miles of the Canadian shield to the cities. Either way is very expensive.
The shortest route from the prairies to tidewater heads north from Winnipeg to the port of Churchill, on Hudson's Bay. It's a short run to the water but often a long wait for a ship because Churchill is frozen solid much of the year. When the port is open shipping is still a problem because ships coming to Churchill have to cross the Labrador Sea near the head of "iceberg ally" -- the route icebergs take south from Greenland to plague warmer waters farther south.
But south of the Canadian prairies the land rises gently for a few miles, then slopes down the Mississippi valley to New Orleans. A railway train can almost coast most of the trip, and a barge can drift down the river. Either way, it's cheap and easy access to a big port that never freezes.
The route to the south was practical even in 1867. In 1872 the Red River Transportation Company, later to become a partner in the CPR, ran river steamers from Grand Forks North Dakota to Fort Garry, Manitoba. When the CPR started work in the west they had a steam locomotive delivered to Winnipeg from Grand Forks, by the river steamer "Selkirk."
The "Selkirk" was built on the Red River but other steamships came to the Red from the Minnesota River, which is a tributary of the Mississippi and which connects with the Red River through a swamp south of Lake of the Woods. There is no easy route through the swamp but some river steamers made it and an easy route could have been developed.
West of Winnipeg, river steamers sailed the North and South Saskatchewan rivers from Lake Winnipeg to Calgary and Edmonton. The one big obstacle was the Grand Rapids, between Lake Winnipeg and Cedar Lake, but some steamers were winched up the rapids. After the service was established, steamers above and below the rapids exchanged cargo and passengers.
Steamers above the rapids covered most of the Canadian west. The year before the CPR reached Calgary a steamship from Winnipeg was sunk at Medicine Hat and, until the wreck of the "City of Medicine Hat" at Saskatoon in 1908, coal was shipped from Medicine Hat to Saskatoon by river steamer. Edmonton had steamer service from Lloydminster until 1923, when the last five steamers burned at their docks in a sensational fire.[3]
Steamers cruised most of the west before the railway was built and, almost any time after about 1820, western Canadian farmers could have shipped grain to New Orleans by river steamer. They didn't because, until the railway was built, grain farming was not encouraged in the Canadian west.
But the railway promoted farming and the Crow Rate subsidy kept western grain in Canada. It virtually created the twin cities of Fort William and Prince Arthur -- now amalgamated into Thunder Bay -- and it made a fortune for the railways, but it stifled industry in the west.
The problem for the west was that the Crow Rate subsidized the shipment of grain and flour, but not of other goods.
Major distilleries in the United States developed in Tennessee, because it takes several pounds of grain to make one pound of whiskey. Because whiskey is expensive, the cost of shipping it is relatively lower than the cost of shipping grain. Farmers could not afford to ship raw grain very far, but distillers could afford to ship whiskey.
In Canada it worked the other way, because the shipment of grain was subsidized and the shipment of liquor was not. Canadian distilleries developed in the east and taxpayers across Canada paid the subsidy that robbed the west of industrial development.
Feedlots, slaughter houses and packing plants for Canadian meat should also have been built in the west -- where the calves were born and the grain grown -- but again the Crow Rate upset the scales. Because the shipment of grain was subsidized and the shipment of meat was not, calves born in the west were shipped to the east. There they were fed grain that had been grown in the west, then they were slaughtered and packed, and some of the meat was shipped back to the west. Because of the Crow Rate the west lost the feedlot and other industries.
When the Crow Rate was replaced by the Western Grain Transportation Act the federal government paid the subsidy direct to the railways, and western industry still had a handicap.
Now the Crow Rate is gone but the federal government still tries to control western grain. Many western farmers would rather sell their grain in the US than in Canada but, by law, they must sell their wheat and barley to the Canadian Wheat Board. If they want to sell it in the States they must first sell it to the Wheat Board, at the Wheat Board's buying price, then buy it back at the Wheat Board's selling price before they re-sell it in the States.
BAD NEWS FOR THE MARITIMES
Confederation also destroyed most of Nova Scotia's industry. At the time of Confederation Nova Scotia and New Brunswick were about as heavily industrialized as Ontario, with established markets in the Caribbean. In 1865 12% of Nova Scotia's exports and 13% of New Brunswick's were manufactured goods. In 1871 the per-capita industrial output of New Brunswick was about the same as that of Ontario and Quebec.
Most of the Maritimes' trade ties were with the United States, Europe and the Caribbean, and there was no significant trade with Ontario and Quebec. The Maritimes didn't want to join Confederation because they were afraid Canada would demand high tariffs, which would damage their manufacturing businesses, but they did want a railway to Upper Canada. Upper Canadians did not want the railway, but they did want Confederation.[4]
After Confederation the Intercolonial Railway was built -- through the United States -- as a combined government/private venture, but it never covered its costs.
Confederation did not change the Maritimes' markets but it did change their finances because Canadian banks were given national charters and, eventually, they concentrated their head offices in Toronto.
Workers in Nova Scotia deposited their wages in the local bank but the Bank of Nova Scotia centered its operations in Toronto. Because the executives were in Toronto the big loans were approved in Toronto. The money that workers in Nova Scotia deposited in their local banks helped finance business in Toronto, while business in Nova Scotia was starved for capital.
Taxpayers across the country pay billions of dollars in subsidies to restore the balance but, with a federal system that centralizes the economy in Ontario, Nova Scotia and other maritime provinces are still at a disadvantage.
In modern Canada Newfoundland is a have-not province, but it was once one of the richest parts of North America. It was bankrupted by British decisions that were intended to give Canadian fishermen an edge over Americans and Europeans.
The island's problems began when England rejected the Bond-Blaine Treaty that would have given Newfoundland fisherman the right to sell their catch tax-free in the United States, and American fishermen the right to buy bait in Newfoundland.[5]
England also made it illegal for foreign ships to buy supplies or be repaired in Newfoundland. For more than 75 years, while the biggest fishing fleet in the world worked the Grand Banks and sheltered from storms in St. Johns' harbor, Newfoundland shipyards and ships' chandlers were not allowed to repair or supply them.
Confederation also created a continuing monetary crisis because of conflicting economic needs. Manufacturing economies like Ontario need a cheap dollar to make imported manufactured goods expensive and help local goods compete in home and world markets. Resource economies like the west need an expensive dollar to make their exports worth more and their imported goods cheap.
For years Canada's monetary policy wavered one way or the other as different politicians gained or lost power and, as the policy was adjusted to benefit one part of the country and penalize another, the federal government tried to balance the books with subsidies. That never worked because the areas that benefit from the policy of the day are taxed to pay the subsidy, and the subsidy is never enough to compensate other areas for their losses.
Now we are settled on a cheap dollar but that was not by choice of the Canadian government. Rather, it reflects the world's opinion of the Canadian government.
THERE ARE SOME WINNERS
But through the years some Canadians have done very well from Confederation. The railways, because they were subsidized to make it work, and other big companies because it offered them a bigger market. The Bank of Nova Scotia, for example, had more room to grow in Toronto than it had in its home market of Nova Scotia.
And confederation is a bonanza for civil servants. With two levels of government to co-ordinate and dozens of assorted subsidy programs to administer, both federal and provincial governments developed huge and very comfortable bureaucracies. Some body counts suggest that more than half of all federal and provincial civil servants are there to co-ordinate the workings of the federal and the provincial governments.
Among the provinces the big winner in Confederation is Quebec, especially since Trudeau forced bilingualism on English Canada but not on Quebec. Now Francophones have a distinct advantage over Anglophones.
The first advantage is in Ottawa, because federal employees must be bilingual. Because most Francophones are bilingual and few Anglophones are, Francophones get first run at federal government jobs. The advantage continues, partly because Francophones now control the federal civil service. We all know that they are completely impartial and that they give no more consideration to Francophones than to others, but we also know that politicians are honest.
Even if there were no bias in the civil service bilingualism would still give Francophones an edge, because it's much easier for a Francophone to learn and practice English than for an Anglophone to learn and practice French.
Most Canadians live hundreds or thousands of miles from any French-speaking center, and the few who live close to the Quebec border don't cross it very often because much of Quebec appears to be hostile to English Canadians.
Most Quebecers live within a few hours' drive of either the Ontario or the United States border, and tens of thousands of them go to the States for winter vacations or shopping. Most of them can practice English in an English-speaking environment, but few Anglophone Canadians have any opportunity to practice French.[6]
Given the Francophone dominance of the federal civil service and the federal government's habit of "helping" selected Canadian businesses, it would not be surprising if some Quebec-based companies found it easier to get federal help than companies based in other parts of the country.
Quebec's suspicion of the rest of Canada is also a unifying force, and it gives the people of Quebec an economic and cultural advantage. As a Canadian I resent Quebec's power and the way it abuses minorities, but my resentment is partly envy.
If Canada were more cohesive Quebec's divisive tactics would not work, and we would gain some advantages.
But French or English, all Canadians lose from Confederation. The economy of the Maritimes was destroyed by it and the economy of the west was not allowed to develop. Even Ontario and Quebec suffered because they were taxed for the subsidies that in some cases damaged the people they were supposed to help, and we all have to support a bloated civil service that serves mostly its own ends.
Some federalists talk about the benefits of a big market area, but that's just bafflegab. Confederation does not allow tariffs between provinces but it does allow other barriers. Through most of history there have been more trade barriers between Canadian provinces than there have been between Canada and other countries.[7] Confederation makes the country bigger but that's no great benefit. Some of the most successful economies of the world have about the same population as the province of Ontario.
THE LAST STRAW
The last straw for the Canadian economy and for Confederation may have been the election of one-time Quebec nationalist Pierre Trudeau as Prime Minister in 1969.
Born rich and educated by priests, he was a dilettante dreamer with no practical experience. Unfortunately for Canada he was also a charismatic speaker and a master manipulator.
His pro-French policy loaded the federal civil service with Francophones, who now make it virtually impossible for a prime minister from any province other than Quebec to hold office.
Politicians from Quebec already had a head start at the prime minister's office because Quebec voters tend to vote for the Quebec candidate, while voters from the rest of Canada tend to vote for the best candidate no matter where he comes from. After Trudeau's French-first policy loaded the federal civil service with Francophones, politicians from Quebec had a second edge because the civil service helped Quebec politicians to get rid of leaders from other parts of Canada.
When Alberta's Joe Clark won the office in 1979 he managed to hold it only nine months. Some say he was tricked into calling an election he could not win.
Trudeau came back for another four years. When he retired his party -- which has a tradition of alternating French and English national leaders -- elected Ontario's John Turner to replace him.
Turner won the election in 1984 but Trudeau double-crossed his own party by openly supporting Conservative, and fellow Quebecer, Brian Mulroney. With Trudeau's knife in his back Turner lasted only three months, to be replaced by Mulroney. Canadians might be forgiven for wondering if Trudeau's loyalty to Quebec against the rest of Canada might have been stronger than his loyalty to the party that gave him power and supported him for years.
Some Canadians believe that Mulroney's first loyalty was to the United States but his power base was in Quebec and his second loyalty may have been there.
British Columbia's Kim Campbell was a sacrificial lamb, because no-one could seriously expect the Conservative party to win another election after Mulroney. After Campbell was disposed of, the Conservatives chose a Quebec Francophone as leader.
Now we have Jean Chretien, a Quebec-based Francophone with a staff of Francophone civil servants, representing Canada in negotiations with Quebec. Somehow, Quebec seems to win most points.
Trudeau also made it possible to turn Canada into a dictatorship, by "patriating the constitution." The words have a fine nationalist ring but in fact the old system, in which the Canadian government could not change the constitution on its own, was close to ideal.
If the government can't change the law, freedom is safe. When a government can change its own laws, it is not bound by law. We saw that when Brian Mulroney packed the Senate with his supporters to ensure passage of a free trade agreement that most Canadians didn't want. Thanks to Trudeau a prime minister with a majority can now act as a virtual dictator, and we have a political system that could easily be taken over by a real dictator.
Trudeau also takes public credit for the "bill of rights" which was proposed and passed soon after the public discovered that the RCMP was illegally opening mail. Publicity about the bill of rights helped smother public concern about federal police breaking the law, and about the creation of a new federal security force that was actually authorized to break laws.
And for all the fooferaw about a so-called "bill of rights" the federal government has never considered it necessary to enforce the rights of English speaking people in Quebec. Quebec's Bill 101, which limits non Francophones' rights to use their own language, is a blatant violation of human rights but our federal government allows Quebec to trample the rights of minorities.
In the fall of 1999 the owner of a video-game franchise in the English-speaking Montreal suburb of St. Laurent was charged with a "language violation" -- which carries fines from $75 to $1,400 for a first offense -- because the address of his store was listed on his business card as "Decarie Blvd." instead of "Boul. Decarie."[8]
Trudeau's greatest damage may have been in the field of economics. With lots of school-book learning but no practical experience he believed in the Numbers Game, and he convinced a whole generation of Canadians that it was possible and even desirable for a significant portion of the population to live on welfare.
He may have destroyed our economy with his moves in education and immigration. With no practical training or experience himself he didn't understand the need for practical training, and it was partly his influence that helped spur the creation of dozens of arts colleges at a time when Canada was in desperate need of trained technicians.
Our need for technicians was partly the result of the policy that closed Canadian immigration offices in Europe and opened new ones in the third world. It's generally believed that the new offices were opened in areas where Liberal party tacticians thought they would attract immigrants who would vote Liberal in thanks for admission to Canada,[9] but the secondary effects were more important.
When Trudeau closed the doors to European immigrants he cut off the supply of skilled tradesmen who could have kept the Canadian economy working. When he opened them to immigrants from the third world -- most of them educated in colonial schools which stressed arts rather than technology -- he brought in well-educated but un-skilled immigrants who could demand highly-paid jobs producing cost goods. These jobs increased the gross domestic product, but most of them were a net cost to the country.
Trudeau's official policy of "multi-culturalism" also encouraged new immigrants to keep the cultures and ideas of their former home lands rather than become part of a new one. The policy fragmented so-called "English Canada" -- which is no longer "English" -- and increased the relative power of Quebec, where it was not applied.
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