Challenge of a Multi-party Parliament—Assessing the Impact on Business

Head Table Guests

Denise Cole, Special Assistant, Social Policy and Media Relations to Mayor, City of Toronto and a Director, The Empire Club of Canada; Donald Ladkin, Director, Corporate Advertising, Maclean Hunter Limited; Rev. Canon Harold Roberts, Rector, St. Timothy's Church, Agincourt and a Past President, The Empire Club of Canada; The Hon. Michael Meighen, Q.C., Counsel, Meighen Demers; The Hon. Barbara McDougall, P.C., former Secretary of State for External Affairs; Tony van Straubenzee, President, van Straubenzee Consulting and a Past President, The Empire Club of Canada; The Rt. Hon. Don Mazankowski, P.C., LL.D. former Deputy Prime Minister; Robert Dechert, Partner, Gowling, Strathy & Henderson and a Director, The Empire Club of Canada; Karl Nilsen, grade 13 student, Northern Secondary School; Heather Reisman, President, Cott Corporation; The Hon. Michael Wilson, P.C., former Federal Minister of Finance and International Trade; William J. Corcoran, Managing Director, Scotia McLeod Inc.

Introduction by Dr. Jackman

Born in la Belle Province, Stanley Hartt had no choice about being exposed to political life. As he was learning to walk, his father Maurice, a lawyer, was elected a provincial MLA and so served until becoming a federal member of Parliament when Stanley was 10 years old.

Stanley Hartt did what was expected. First he studied law at McGill and later became a lawyer with Stikeman Elliott and for 20 years maintained an active practice and teaching commitments in labour law and labour relations. Then following almost in his father's footsteps, he became seduced by the fascination of our federal bureaucracy and joined the Department of Finance. It is rare that a distinguished professional turns to government service. Stanley was no slouch, he put in 15 minutes as an apprentice and then The Honourable Michael Wilson moved him into the office of Deputy Minister.

One might think that running all that money would satisfy most people for a while--but not Mr. Hartt. So when he was offered a chance to become Chief of Staff to Prime Minister Brian Mulroney he said, "See ya Mike; hello Brian."

In any event, Mr. Hartt received an insider's education about how the Federal Government works and is now ably suited to discuss with us how our Parliament will operate in the new Canada. What is particularly interesting is how two of the older parties, now barely represented in the House of Commons, will impact on public policy--or will be ignored. As Peter C. Newman believes "...(this past) election wrote an epitaph for Canada as a two-party state." "Trust Canadians, he wrote, to invent a new system of government; an elected dictatorship." He believes, "...we've come dangerously close to becoming a one-party state."

Before Mr. Hartt speaks, I would like to point out for those of you in the audience who have been saying, "I've seen that man somewhere before," that Mr. Hartt is indeed the amiable moderator of the cross-country televised tour of the Tory leadership debates we all watched last May and June.

That Mr. Hartt was chosen as a deputy minister, as Chief of Staff, as a television debate moderator and now, in his present position as Chairman of Camdev Corporation, is a tribute to certain of his human qualities. He is viewed as thoughtful, and as a good listener. His judgment and decisions are sound. His impartiality and even-handedness are respected. He is patient but deliberate. And he can be serious as well as entertaining.

I suspect that Stanley Hartt will demonstrate all of these qualities, and more, in his address to us today: Challenge of a Multiparty Parliament--Assessing the Impact on Business.

Ladies and gentlemen, please welcome Stanley Hartt.

Stanley Hartt

The honeymoon which follows the election of a new majority government is a dangerous time for any speaker to attempt to analyze the results and make predictions about the consequences. Until the euphoria over the substantial chances in the political landscape turns into the inevitable disappointment brought about by actually governing, an observer, particularly a notoriously partisan one, runs the risk of being out of step with conventional wisdom.

For one thing, I do not share the prevailing opinion that the election result should be principally interpreted as a popular rejection of the old way of "doing politics" and a protest against traditional elites. To be sure, after the Charlottetown Accord was rejected, the media were unanimous in the view that, because Charlottetown was the product of an all-party Parliamentary consensus, endorsed by every provincial government, important business and native leaders and many other opinion moulders, its defeat seemed to represent a turning away from entrenched political leadership in favour of a new inclusive, consultative and populist manner of formulating policy.

It was Kim Campbell's misfortune to believe this new orthodoxy, and polling results appeared to confirm it. People said they were angry, fed-up with being lied to by office holders, and they told pollsters that it was time for their views to be heeded, for politicians to be frank and honest with them. But on October 25, they voted for a political platform called "Creating Opportunity" that very few of them had read. The press relaxed its usual standards and did not subject the document to probing critical analysis. As a result, the content, though astutely compiled to push every hot button, did not have as much impact with the voters as the subliminal messages conveyed each time the red cover was flashed, which were "jobs" and "hope." Canadians voted for the team which offered political leadership.

They voted against the politician who began her campaign without any plans to publish a platform because that would be telling Canadians what the answers were instead of asking them. They voted against the leader who shared with them her fear of a jobless recovery, even though this is widely seen as an honest view, and for the party which promised to kick-start a $700 billion economy with $6 billion worth of infrastructure investment, despite the possibility that the programme would never be funded by impoverished municipalities and provinces, while at the same time proposing to trash many hundreds of high-tech jobs across Canada by cancelling the EH-101 helicopter contract.

Of course Canadians are fed up with high taxes, high unemployment, political perks and lavish spending, jobs for the boys, and recurring scandals. They have every right to be. I don't deny that they expressed that anger in the way they voted--Liberal, Bloc and Reform--anything but Conservative. I am arguing, however, that the Liberal majority victory was a traditional delegation of responsibility for the common well-being to a party which inspired confidence. It was not an endorsement of a new style of inter-active communication between the governors and the governed. Liberal voters never meant to be understood as having said they wanted to be the decision makers and to turn their parliamentarians into messengers. The red book won the confidence of Canadians by saying, "We'll take care of you."

I think it is more appropriate to analyze the electoral outcome in a different way. I see it as a polarization of political opinion, everywhere except in Quebec, on the great issues of vision of country and the appropriate role of government in protecting the citizenry. I say everywhere except in Quebec because there is evidently a very different vision in that province about the nature and future of Canada which should be examined separately, since the nationalist sentiment expressed in voting patterns is shared across all elements of the traditional political spectrum, from left to right, from trade unionists to educators, from journalists to entrepreneurs. I will come back to the Bloc and its third vision for Canada in a moment.

The two fundamental visions which competed for the affections of English Canada in the 47-day campaign were about differing reactions to clear, undeniable phenomena. Canadians are aware that Canada grew wealthy in an era when its natural resources--minerals, fossil fuels, forest products, hydro electric power--were in great demand. We value the society we have built precisely because we made a collective choice to spend a significant part of the resulting abundance on an old age and retirement security system, a medical care and hospitalization plan, state-funded post-secondary education, generous unemployment insurance, the Canada Assistance Plan for welfare recipients and social assistance, family benefits, allowances for veterans and the disabled, compensation for injured workers, all of which have created an enviable social safety net.

But Canadians are uneasy about changes in the world which challenge the applicability of the formula which brought us so much success. The era in which Canada enjoyed comparative wealth by organizing its great resource industries to pump it up, dig it out or cut it down is being supplanted. The new newsprint plants are located, not in remote forests where the trees are, but in large centres, close to the printing plants, where de-inking technologies and a supply of recycled fibre make them more efficient.

New technologies in resource extraction and processing have made our specialties more accessible to competitors, and more marginal finds more economically exploitable. Falling world commodity prices were a partial result of these phenomena. World interdependence produced an increasing trend to openness and integration among nation states and a movement to new international forms of competition among firms. Developments in manufacturing efficiency produced rationalization and dramatically shifted employment growth to new occupations, particularly in high-technology, idea-based products and services.

The old Canadian social compact, based on protectionist and interventionist government economic policies and on redistributing the fruits of resource-driven growth to individuals and to other levels of government, did not, and could not, have a lifetime warranty.

These trends have left many Canadians concerned and nostalgic for the days when governments could effectively shelter populations from adverse developments. When the outgoing government responded to the new forces unleashed in the world economy with measures which included a Free Trade Agreement with the United States, a NAFTA to expand free trade to Mexico, tax reform and the GST, a committed fight against inflation, and a programme of deficit reduction that resulted in downsizing and cuts to familiar institutions, like the CBC and Via Rail, this was too much change at once. Compounding this sense of "what is happening to my Canada" were the crippling recession induced by debt-ridden public and private balance sheets, permanent structural shifts in the profile of the world-wide manufacturing sector, and two unsuccessful attempts to improve the Constitution.

For some Canadians, this policy mix entailed a national betrayal. Our prosperous and tolerant country was being forced into a competitive struggle with other societies which was out of step with the traditional vision of Canada, when our confidence rested on the bedrock of a conviction that our destiny was ours to control. Wasn't it only yesterday that government-subsidized cultural institutions and transportation enterprises united the country? We protected ourselves against foreign investment, foreign control of our energy-producing industries and against paying the cost of research for new pharmaceutical products.

Audrey McLaughlin said, during the election campaign, that the Liberals campaigned like socialists and governed like Tories. It would be unfair and inaccurate to argue that the red book advocated a return to the past, or that I expect the Liberal Party will govern as they did in the past. Indeed, the composition of the new cabinet seems to indicate a desire to empower those ministers who will give confidence to investors and control or isolate those whose more progressive ideas might be cause for alarm. But the appeal of the Liberal Party, studiously and cleverly cultivated, was to that portion of the populace that most disliked the changes being imposed on the Canadian paradigm.

On the other side, Reform voters and the two-million-plus Conservative voters knew that the changes occurring in Canada were a realistic response to changing world and Canadian circumstances. The change in public policy mix happened at the same time in all developed countries. Canada was not the only place in the world where comfortable traditions had to be abandoned in order to protect the best of what had been created.

The conservative revolution did not spring from the minds of Margaret Thatcher and Ronald Reagan in order to further the agenda of the greedy and heartless. Rather, the more conservative approach to public policy flowed from a reaction to the excesses of the Keynesian burden. When Mrs. Thatcher came to power, the U.K. was an I.M.F basket case.

The Canadian welfare state and the debt it would occasion were not sustainable once the immediate post-war boom, in which real incomes doubled every couple of decades, abated. Governments are no longer the appropriate instrument for solving all macro-economic problems. Societies cannot indefinitely redistribute more wealth than they create. The ability of governments to command desirable outcomes is past. The real threat to our well-being lies abroad, beyond the scope of our government's writ.

Where Reform and Conservatives differed was in their view of how ready Canadians were to respond to the challenges to the traditional Canadian vision. Reformers did not vote against Conservative candidates because they dismantled familiar institutions. They voted against Conservatives because we said we would reduce the deficit and left it higher than we found it. We failed to take advantage of the high-growth years, from 1984 to 1989, to take a substantial bite out of the apple, so that when the automatic stabilizers built into some of our transfer programmes, and lower tax revenues, came into play in time of recession, we would still have made net progress in reducing the annual shortfall.

The Conservatives did what all parties in power do. It tried to occupy the political centre. This meant reducing the deficit, but not too quickly. It meant selling every anti-deficit measure as a reduction in the rate of growth of this or that programme, and, God forbid, not as a cut. It meant saying, during the recent election campaign, that reform of social programmes was too important to be debated during the 47-day writ period, even while Mclean's Mary Janigan, no right-wing ideologue she, was writing about "Social Programs: the cuts to come," and saying, "The politicians have failed to tell voters the whole truth about the looming crisis in programme funding."

Understanding about the deficit and the dangers it poses for our future and that of our children has grown and developed since 1984, when Brian Mulroney was confronted on Parliament Hill by the little old lady who coined the immortal phrase "Bye-bye, Charlie Brown." Even Brian Mulroney may have underestimated the extent to which he was successful in winning the hearts and minds of Canadians to the cause of fiscal responsibility. Ironically, the political margin of manoeuvre for governments in tackling the deficit is larger in 1993 than it was in 1984.

If the Liberal vote should be interpreted as a desire to maintain the old, comfortable relationship between government and governed and the Reform vote as a wake-up call to confront new facts, it is far more serious that these two visions of Canada appear to be regionally based, with Atlantic Canada and Ontario hoping that activist governments with programmes can protect Canadians from the uncertainties of globalization, while a majority of the MPs from the four Western Provinces believe that jobs will be created by the private sector only when the government gets out of our face. Regional tensions are great enough in this wonderful country of ours. To have them reinforced by ideological differences makes both the regional and the ideological conflicts more acute.

So where does this leave us? Canadians face a number of challenges. Most important are the economic challenge and the constitutional challenge.

The economic challenge is well known: Our unemployment rate is unacceptably high, but the quality of jobs is every bit as important as the number. If the electorate is comfortable with the way things were, we will never generate the high-skill, high-value-added, high-wage jobs of the new economy. If we continue to run massive deficits at both the federal and provincial levels, private investors, domestic and foreign, will shun Canadian investments, fearing that taxation or inflation or both will be used to confiscate expected returns in order to service, or devalue, the debt.

Our deficit for the year ended March 31, 1993, has been announced as $40.5 billion. The deficit track set out in last April's budget is considerably higher than the $32.6 billion expected this year, $29 billion expected for 1994-95, $21 billion in 1995-96, $14 billion in 1996-97 and $8 billion in 1997-98. Economic growth is slower than predicted, the recovery sluggish. The vicious circle of recession increasing the deficit and the deficit impeding recovery is fully upon us.

Yet we are operating with both hands tied behind our backs--$465.3 billion in federal debt at the end of the last year, coupled with a record provincial debt, left us with a national public sector debt of $650 billion last year. This was more than 90 per cent of last year's GDP, one of the highest ratios for a country that has not yet felt the cold embrace of the IMF with its imposed adjustment programmes. The IMF will not tell Ottawa that our social programmes are a sacred trust and cannot be touched.

We would be far better to deal with the funding shortfalls your social programmes are already experiencing. To do this, Liberals will have to renounce past axioms and adopt what will look very much like a Tory agenda. The stated Liberal goal of three per cent of GDP will be an unacceptable level for the federal deficit, and markets will react poorly to the prospect of adding $100 billion to the debt every four years, which our government tells us it is prepared to accept.

If we shun trading arrangements because they mean changes to our industrial structure and employment patterns, the world will grow around us and without us. If we spurn foreign investment, we may find out that the real danger is that investors decide Canada is not worth the risk or the trouble. If we are prepared to live with a little inflation, we may be forced to live with a lot. If we rely on income taxes to pay for our social programmes instead of consumption taxes, we will become uncompetitive and price ourselves out of external markets because businesses price with their after-tax net in mind. Yet we rely on trade for 30 per cent of our GDP If the total tax burden is not reduced, the resolve of Canadians to shoulder, and own up to, the burden of paying for our way of life while servicing excessive past spending, may falter, and we stand to lose everything that we cherish.

For our newly-mandated leaders, the implication is clear: Despite the temptation to govern with a centrist agenda, realities must be addressed, and myths debunked. Competitiveness must not be allowed to become a dirty word. Deficits matter. The markets, so enthusiastic at the election of a majority government and comforted by the selection of ministers in a slimmed-down cabinet, but nevertheless nervous about our deficit and unity challenges, will turn on Canada in a second if they see the slightest sign of pandering to a tax-and-spend nostalgia when the $6 billion infrastructure programme is finished and unemployment is still over 10 per cent. The Liberals are bound to disappoint those of their voters who wanted to define the Canadian vision the way it had been defined for decades.

The exciting thing is that the new government can make a difference. Even if the era of blockbuster programmes is over, government leadership is still critical if we are to succeed in adapting our society to the new realities. Skills and training initiatives, designed to create harmonized and portable programmes with national standards would have the additional benefit of making the existing Constitution work. The jobs of the future cannot be inhibited by jurisdictional boundaries.

Harmonization of tax policies and co-operation in limiting the aggregate tax burden imposed by all levels of government, as well as the elimination of all remaining inter-provincial trade barriers will all add to our competitiveness.

The cost of capital must be lowered and new encouragement found for venture capital and research and development.

Most importantly, we must reform the funding of our social programmes so as to make them sustainable. Transfers to persons and other levels of government account for $67.7 billion this year, over 43 per cent of total federal budgetary expenditures and over 56 per cent of total programme expenditures, that is, all expenditures other than interest on the national debt. Attacking the deficit problem without addressing this category of spending is like trying to lose weight without dieting or exercise. This is where the money is. It is also the greatest threat to our hopes for fiscal sanity because these expenditures, certainly those for health care and education, are rising faster than our ability to provide for them.

Transfers to individuals and governments have also been left relatively untouched, largely because of the howls about "sacred trusts" that surrounded all past attempts to nibble around the edges, so afraid were Canadians that no one could be trusted to reform the funding of social programmes with honourable intentions.

Other areas of government spending have, on the other hand, been cut time after time: payments to crown corporations, defence, international assistance, government operations.

Just as Richard Nixon could go to China, and Rene Levesque and Bob Rae could roll back public-sector wage agreements, perhaps the Liberals can save the social programmes they are identified with by the application of some tough love. Who has more compassion--the doctor who amputates a toe to save the foot or the one who tells the patient everything is fine?

Last spring the Deputy Minister of Finance, appearing before the House of Commons Finance Committee, was asked whether he would be able to serve in a government of a different political stripe, should one be elected.

"Certainly," he replied. "They'll all have to do more or less the same thing."

Far less easy to deal with is the unity challenge. Her Majesty's Loyal Opposition is composed of 54 Quebecois dedicated to the separation of Quebec from Canada. Like Babe Ruth pointing to the centre field fence, they have let us in on their game plan: first, a provincial election next year; then, a referendum on sovereignty, with the declaration of independence scheduled for June 24, 1995.

The polls indicate that the sovereignist Parti Quebecois would win a provincial election if it were held today. Of course, since a week is an eternity in politics, there is still plenty of time for the unexpected to happen. Daniel Johnson, Jr. could prove more popular as the replacement for Robert Bourassa than he appears today. Or Quebeckers might try a variation of past patterns of perverse voting by sending separatists to Ottawa while electing federalists at home. Or Jean Allaire might do to Jacques Parizeau what Roderigue Biron did to Robert Bourassa in 1976--in this case, split the sovereignist vote so that the federalists sneak up the middle.

The poll published in the current issue of the Financial Post Magazine should not give us as much comfort as the screaming cover line ("Quebec Wants to Stay") implied. We have always known that on a straight, brutal question, independence loses. What is less clear is the kind of mandate that might be obtained by manipulation of the question in the grey zone of more sovereignty coupled with some new association with the rest of Canada.

All of this masks the fundamental fact that the rejection of Meech Lake and Charlottetown did not produce a solution to the underlying claims and dissatisfaction which started the interminable constitutional haggling in the first place. This unrest is fundamental, not only in Quebec but among our native population as well. When well-justified, historical complaints are not addressed by constructive and innovative solutions, don't be surprised when some less attractive alternatives emerge. It is not good enough to shrug these off as nonsense.

Quebeckers have long sought constitutional jurisdiction to ensure the survival and development of the French language and culture. Since the Quiet Revolution, this has included not only education and culture, but the means to ensure that Francophones can earn their living, and demonstrate their competence and be promoted and thrive in French. What they were promised in order to induce them to vote No in the 1980 Referendum was renewed federalism. What they got was an amending formula, patriation and an entrenched Charter of Rights. Reasonable as these may be, they are not "renewed federalism" to Quebeckers because they do not deal with the division of powers or enhance Quebec's ability to remain French. Worse, this was all done without the consent of the Quebec government of the time--the sovereignist PQ government led by Rene Levesque.

Telling Quebeckers that they are bound by the new Constitution despite the absence of their consent does not inspire greater loyalty either. The only thing that would have worked was getting the duly elected government of Quebec to sign on to the new arrangements.

This was what Meech Lake was all about. While some opponents argued that further appeasement of Quebec's demands would only whet its appetite for more and would not solve the dissatisfactions of generations, the fact is that Meech was widely heralded and accepted in Quebec. Even Jacques Parizeau and Lucien Bouchard had to position their opposition to the McKenna proposals and the Charest Report as an attempt to "save" Meech. Of course Quebec would not renounce its right to ever make a constitutional proposal again. No other province had to; why should Quebec? But I put it to you that a photograph of Robert Bourassa signing a unanimous agreement bringing Quebec voluntarily into arrangements to which it was already technically bound would have had a psychological impact on all future relations. Talk of being left out, of having Quebec's powers diminished without its consent, would never have washed again.

I also believe that the price of Meech Lake--if it was a price--was minimal compared with what we face now. Jean Chretien may well reflect that he would have been better off coming to office with the constitutional crisis behind him. His support for the Accord might have enabled him to benefit once in power from the calm its adoption would have produced, with Brian Mulroney bearing all the blame for Meech's unpopularity in the rest of Canada.

So here we are--faced with the prospect of divided country just when we need stability. Worse, most of us are telling our political leaders we are sick and tired of constitutional debates and only want to hear about jobs. No greater threat to jobs faces us than the unsolved constitutional problem, even the unsolved deficit problem. The separation of Quebec cannot be expected to take place on a friendly basis. The economic union we now enjoy could not be re-established without skipping a beat as Mr. Parizeau claims, even if non-Francophone Canadians were so emotionally numb as to not mind the removal of a piece of their country without their being consulted. Mr. Parizeau's "business as usual" model is based on a caricature of English Canada--an English Canada which he does not understand--an English Canada which he sees as interested only in profits, phlegmatic, rational, with ice-water in its veins. Quebec's proposals on shares of national debt, assets and territory to be assumed by a separate Quebec would appear to most level-headed, business-oriented non-Quebeckers as confiscation and produce a schism in the free flow of goods and services that would severely damage both sides in this highly complementary economic relationship.

It is true that Quebec would suffer most, but Ontario would be close behind. When your customer is broke, you don't make many sales. In short, Ontario would suffer economic dislocation that would make the last recession seem modest by comparison. So much for "let'em go." Furthermore, Quebec's accession to free trading arrangements with the U.S. and Mexico is not to be taken for granted, particularly when the subsidy practices on which so much of Quebec Inc. is based are offensive to existing national and international trade law. And, Mr. Manning, every other province has an economy that is complementary with Ontario's, so the cost of "let'em go" will be paid Canada-wide.

This, then, will be Mr. Chretien's greatest challenge--how to appeal to the majority of Quebeckers who want revised constitutional arrangements without talking about the Constitution; how to deflect threats of a PQ government in Quebec, with dollars we do not have. In any event, the cancellation of the helicopter contract is a clear indication our new prime minister has no intention of using bribery.

It won't go away folks. It has to be dealt with. So do the well-founded, overdue claims of natives. On the Constitution, as on the economy, the Liberal majority will have to do what the ousted, marginalized, chastened Conservatives did--confront Quebec's expectations and deal with them.

As for the New Democratic Party, its fate is proof of the proposition that governing is different from opposing. When the bond salesmen told Bob Rae how his spending shortfalls were impacting markets, he had no choice but to take some drastic measures which cost him his labour constituency in a permanent way which no amount of social engineering could redeem. As Reform has scooped the right, the Liberals have scooped the left.

Will the Conservatives survive to rebuild? I certainly think so. Using alliances with provincial parties, perhaps sharing facilities and organizations, relying on volunteers to replace paid staff, basing its parliamentary research function on its presence in the Senate and using its Senators as the core of a roster of policy spokespersons, the Party will reorganize and continue. About a year from now, the Conservative Party should hold a policy conference to renew its intellectual capital and decide on its ideological place in the sun. Governing with pragmatism did not endear us to the supporters of either vision of Canada. We will do better offering political conviction.

For the political junkie, the next four years will be fascinating.