Finding a Better Way for Canada

Head Table Guests

Michael Walker, Executive Director, The Fraser Institute; John A. Campion, President, The Empire Club of Canada; Bob Peterson, Chairman, President and CEO, Imperial Oil Ltd.; Keith P. Ambachtsheer, Keith P. Ambachtsheer Associates Inc.; Preston Thom, President, Comdisco Canada Ltd.; Stan A. Lissack, VicePresident, Corporate and Government Affairs, Astra Pharma Inc.; Sonja Bata, Director, Bata Limited; David Smith Sr., Vice-President and Director, ScotiaMcLeod Inc.; and R. J. Addington, Chairman, Board of Trustees, The Fraser Institute.

Introduction by Herbert Phillipps Jr.

Distinguished guests, ladies and gentlemen:

We have been too long preoccupied with Quebec and its aspirations to the detriment of the interests of the rest of Canada is the basic message in Mr. Gibson's latest book entitled Plan B--The Future of the Rest of Canada. Mr. Gibson's life experiences have more than prepared him adequately to deliver a very clear message on this most emotional topic which is to appeal for rational strategy.

Our guest speaker was born in Vancouver and has spent most of his life in British Columbia where he attended university and achieved a Bachelor of Arts with honours in mathematics and physics. Subsequently he attended Harvard Business School where he obtained a Masters in Business Administration with distinction. Mr. Gibson continued his formal education by performing research work in political science at the London School of Economics.

Gordon Gibson has an astounding political career which began in earnest in 1963 when he served as Assistant to the Minister of Northern Affairs. One of his most rewarding postings was the appointment from 1968 to 1972 as Special Assistant to the Prime Minister of Canada, none other than Pierre Elliot Trudeau. During this period Gordon ran in three federal elections and was elected to the legislature of BC in 1974. He also served as both MLA and Leader of the BC Liberal Party from 1975 to 1979.

Since then he has been most active in both the business and public sectors, including 12 years on the Canada West Council where he co-authored regional representation. Mr. Gibson served on the task force for national unity for two years commencing in 1991. During this period he authored What if the wheels fell off?--a case for a constituent assembly.

Ladies and gentlemen, it is with great honour and pleasure that I present to you the man who has asked us to think the unthinkable before it's too late--Mr. Gordon Gibson.

Gordon Gibson

Thank you, Herb, for those very kind words. I want to start out, as did Michael Walker, by thanking the sponsors of this luncheon and this tour and of course The Empire and Canadian Clubs for their generous help as well. I can go a little bit further than Michael can to thank The Fraser Institute as well. I had never had more than a casual association with The Fraser Institute until I was asked to write a book back in late February. We struck a deal to have it written by June 1 because we thought there could be an election in Quebec in June. And so I had a most intense working relationship with The Fraser Institute, that was doing the economic research that fits into the book. I can tell you my admiration for that group and the work they do in this country is just absolutely unbounded, so I will add that additional appreciation. The title of this presentation is "Finding a Better Way for Canada." This talk in Toronto is the first presentation. Every time I come to this city, I think to myself what a great, powerful, wonderful city this is. It works so well for you. I think to myself, "How can I come to Toronto and ask Torontonians to talk about improving Canada when it's hard to improve from your point of view?" The same thing with Ottawa. Every time I go to Ottawa to visit some of my money I say to myself, "Boy, the system works well for these folks. I wouldn't change it if I was them." So that's the first challenge of thinking the unthinkable--thinking about changing Canada. For a lot of Canadians, things are just fine.

The second challenge a person has in the climate of today is the disposition to regard the Quebec election as the comforting development that M. Parizeau didn't get much of a majority at all. (The popular vote just barely won!) That it was, in effect, a win for the provincial Liberals, because Mr. Johnson has good support now. You can pretty well forget the referendum because it isn't going to pass. That, again, is the general climate across this country (although there was a very good article in The Globe and Mail yesterday by Kenneth McRoberts that challenges that).

And finally, there is the accepted wisdom, which is, this. The United Nations says that Canada is the best country in the world to live in, as M. Chretien keeps telling us, and our economy is finally growing. So that's the context in which we say: "Do we really want to change this thing?"

But there's another side to all this, I would suggest to you. Forty per cent of Quebeckers actually want to answer "Yes" to the hard question: "Should we separate from Canada?" Seventy per cent of Quebeckers clearly want to change the federal system. (Maybe 60 per cent of Westerners would feel the same way. Sixty per cent, 70 per cent of Maritimers, Atlantic--province people, are very reliant on Canada but very unhappy with their economic circumstances. And 95 per cent of the Natives in this country don't like the system at all. There are problems.) The Quebec election was a bad night. However you slice it, it was a bad night. If you add the Party Action Democratique vote, at six and a half per cent, to M. Parizeau's vote, well over 50 per cent, a separatist government now has control of the budget of billions upon billions of dollars. They have the ability to commission reports by consultants and public servants that allegedly prove that the best thing for Quebec is to go away. They have the first shot at the media in the province of Quebec which is sympathetic to start with. They have the agenda, the timing, the initiative and most important of all, they have what I call the box. M. Parizeau is able to represent to his fellow Quebeckers that they are in a box, that there are only two doors and that one door says "Status quo" and the other door says " Separation." That is the pitch he is going to make to them. I am going to come back to that because we've got to break that box.

But let us not be under any illusion here. We are up against very shrewd and resourceful people. They know why they lost the referendum last time. They intend to run it in a very different way this time. It is going to be provocative, it is going to be tough and it is going to add immensely to the uncertainty in this country.

M. Parizeau knows that he has as a model what happened in Czechoslovakia. Those of you who have the book will find at the beginning a brief allusion to the fact that in the middle of 1990, public opinion surveys in Czechoslovakia, on both sides of the new border of that country, asked people how they saw their country evolving. Only five per cent of Czechs and only eight per cent of Slovaks in June of 1990 wanted independent countries. Two and a half years later, of course, the final papers were signed and there were independent countries. The major reason for that was the election of a strong separatist leader in Slovakia who, of course, marshalled his own troops. But the other thing he did was to systematically stick his finger in the eye of the Czechs day by day, week by week, until finally the Czechs themselves were quite prepared to say "Go" at the same time the Slovaks said, "We want to leave." And very clearly, one of M. Parizeau's tactics, one of M. Bouchard's tactics, is going to be softening us up to make us willing parties to the negotiation.

So what I am trying to say to you is that we do have a situation where we may have to think about the unthinkable. The financial status quo in this country is clearly unacceptable. I don't think I have to explore that at any great length with an audience like this. We cannot continue with $40 billion deficits. We cannot, in my opinion, even continue with a $25 billion deficit, which was the target of the Liberal Red Book. We have to get down to zero, and we have to do it reasonably quickly. And if we don't do it voluntarily, others will require us to do it. The implication of this: the federal government has zero money to spend in making people enjoy federalism and the province of Quebec. And au contraire, if I may say so, they are going to have to be cutting programmes and they are going to have to be doing that during the referendum period. The political status quo may or may not grow. But there are some tensions there. The sentiment of what I call ROC, the acronym for the rest of Canada is very clear. The sentiment has hardened tremendously over the past couple of years and the sentiment is no deals for Quebec. That is just the way people feel. Whether it is sensible or not, that's the sentiment. And yet, as I said before, 70 per cent of Quebeckers are very clearly on record: "We want change in the way this country is governed."

So let me, with that background, model just the next year and a quarter, up to the end of 1995. First of all, this perspective: the enemy over this period is uncertainty. The enemy is not Jacques Parizeau, it's not the separatists. These are decent, ordinary Canadians, who have a different point of view. They're part of the problem; they're not the enemy. Ottawa is part of the problem too. It's not the enemy. Uncertainty is the enemy, and again, an audience like this knows that uncertainty leads to the failure to make decisions. To make decisions to invest and to create jobs, for example. Uncertainty creates interest rate premiums that make doing business more difficult. Major purchases are put off. It sucks up the time and energy of our leaders across this country. Whatever we say, it's going to do that until this problem is resolved.

Here is my betting on how things will unfold by the end of 1995. I am going to give you odds on each of five possible outcomes. The first outcome is there will be no referendum held till December 1995. I think this gets at least 20 per cent. The result of this, of course, is uncertainty. There is no referendum held because obviously M. Parizeau is holding off until he thinks his chances are even better.

The second scenario, and the one that the federal government and probably most English Canadians would like to see, is a slam dunk defeat of the referendum. Let's say a defeat of at least the 60-40 that happened to Rene Levesque over a decade ago. I don't give that more than 10 per cent.

The other scenario that would remove at least Quebec's uncertainty is a slam dunk win for separatism, again at least 60-40. The reason that that resolves Quebec's uncertainty is because then, I would suggest, they have a reasonably rapid and smooth departure from Canada. It does not resolve our own uncertainty, for reasons I will come to.

The final two scenarios are a narrow win or a narrow loss for the referendum. Because I don't have a crystal ball any more than any of the rest of you, I don't know how to do better than to say that maybe each one has about 30 per cent likelihood. If there's a narrow loss for the referendum, there will have been a Francophone majority nonetheless. The result of that, I would fear, is the initiation of the Irish question in Canada, if you like. The systematic opposition in the Parliament of Canada by the Bloc Quebecois, as the Irish did in the Parliament of Great Britain, and the systematic unrest in the Francophone community in the province of Quebec virtually guaranteeing the re-election of a PQ government, in my opinion, I would therefore entail another referendum after that next election.

I feel that a narrow rejection of the referendum will prolong uncertainty, probably longer than anything else. A narrow acceptance of the referendum doesn't end the problem by any means. English Canada will not be ready to accept the results. We will not have in place any negotiators with a mandate. We will not have any negotiating strategy. Working those things out might require another federal election. It will certainly require a good deal more than a premier's conference. You can see the potential for the confusion there. And yet there's no easy resolution, because at 51 or 52 per cent, there's absolutely no way that M. Parizeau can make a unilateral declaration of independence. You cannot, in a democratic society that is divided against itself 49-51, do anything as important as that. So we will be at an impasse and a very serious one in terms of what I say is our real enemy which is uncertainty.

There are two ways to get at this uncertainty. One is by the polls if over the next few months they are showing a slam dunk loss for the referendum. That's clearly what M. Chretien hopes and that indeed will solve the problem.

The other way we can get at it (and you will forgive me I hope for saying the C-word) is go back to the constitutional drawing board. There are very few things that people hate to hear more than more talk about the Constitution. But maybe it is what we have to do.

To underline the reason for that, I want to bring you back to what I call M. Parizeau's box. You've got the two doors for the people of Quebec--the status quo and separation. He will systematically frustrate the status quo. He will make no deals with the feds. He will make provocative statements and generate incidents. There will be a feedback of negative emotions from ROC to Quebec, and all of this will widen the separation doorway. He will set up, as I said, commissions and studies, to "prove" this is the best way to go. He will make deals with the people who might be able to frustrate him. The Natives of Northern Quebec will find that they will get an unbelievably good deal from Jacques Parizeau if they will sign on to the project of an independent Quebec. He can make a much better deal with them than Canada can. Canada has to worry about precedence all across the country in terms of self-government and Canada has no resources to give over as the province of Quebec has. I forecast to you that M. Parizeau will make that deal. M. Parizeau will say to the Anglophones of Quebec, "You are wanted, you are loved and I am going to prove it. I am going to pass the most significant protection of language law that you ever saw." Because it's a win-win situation for him. He cannot afford to have the Anglophone community and the Allophone community--those who can leave--leave. Who are the mobile people? The mobile people are the wealthy people, the employable people, the young people. Those are the people who will go if Anglophones do not feel comfortable in Quebec. He cannot afford to lose them. He will make certain they stay. He will even make overtures to Atlantic Canada of perpetual rights and free passage, which will help diffuse that important issue. He will make deals to attract showcase investments to Quebec from the few large corporations around the world and he will continue building fear of the consequences of the federal debt, which he is doing quite effectively now.

If that box just has those two doors, they could go through the separation door by 51 per cent or more. In my book (at the moment we are in chapter two) I take us through this scenario in the first nine chapters, summarising it all in chapter nine. In chapter 10, I give what I believe to be the answer, and that's a box built around the concept of Plan C. You create another opening for the electors of Quebec, and you say you can go status quo, you can go separation, or you can go very significant, even massive, decentralisation which the polls show us that Quebeckers would like. Significant decentralization, massive decentralization. Surely no one in the rest of Canada wants that. We want a strong central government. Why should we even look at decentralisation?

I think we should look at it because, I think, it is good in its own right. That's the first thing I say. I'm not counselling you to do anything that I think is incorrect. I think it's the right thing to do. Secondly, I suggest that more people want this decentralisation solution than we think, particularly in Western Canada and in the Native community. And thirdly, taking a very pragmatic approach, maybe it's the best we can do.

I shall deal with these in reverse order. Albert Einstein, when he couldn't get access to enough atom smashers, invented the concept of a thought experiment. I may ask you to do this thought experiment: accept the premise that Quebec is gone.

Now what? The answer given by most people is something like this. Well, I guess, Canada will carry on in much the same fashion. Maybe we'll be a little bit richer because we don't have to send money to Quebec every year. Maybe we'll be a little bit culturally poorer because we don't have that second linguistic group. But we carry on all the same. That is what I thought when I started to write this book. But as I thought my way through it, I came to a very different conclusion. My conclusion is that the Canada that will come out of this will be radically restructured and decentralised at the very best and possibly fragmented.

Now the implication of the view that life goes on is very simple: you play hardball with Quebec, or you ignore Quebec, but you don't make any changes in your life, which is perfectly good. The implication of my conclusion is very different. The implication is that you'll go voluntarily in the decentralisation direction because it's good on its own merits and it avoids the larger risk.

I think I've got to justify to you why I believe that the rest of Canada would not automatically stay together. I'm going to do that under four topics: the shock to the system caused by Quebec's departure, the balance of money, the balance of power and the balance of policy in what remains of Canada.

The shock to the system. If Quebec is gone what is the glue that can hold Canada together? There are different kinds of "national glue" in this world. The Americans pledge allegiance to the flag, are idealists, love the constitution, and so on. We are a much more pragmatic country. Our glue, our national glue, I've concluded, is mostly inertia and sentiment. Those are not bad things. Inertia is a very durable glue, but it has a characteristic brittleness: when it gets hit hard, you fly apart.

Now let us look at the money. An honest discussion of income flows in this country would amaze many of us. The numbers are in my book. The monetary transfers out of Ontario to the rest of this country are phenomenal. You do not usually choose to examine these things. None of us do. We are generous to the rest of our country. We want Canadians to have a decent standard of living. But when you start looking closely at those dollars, as will happen at this point, you see that they're phenomenal. Now the Canadian bargain on income transfers has been forged by an alliance of seven provinces. Quebec, the four Atlantic provinces, Saskatchewan and Manitoba. They are all net receivers, in some cases of very large sums. Incidentally the Atlantic provinces, on balance, receive over three times as much from the rest of Canada as Quebec does. So those numbers are going to be carefully studied. Let's look at the politics of the situation. With Quebec gone, 50 per cent of Canada's population would reside in Ontario. Now we are not going to abandon the concept of representation since that is a fundamental principle of our democracy. But are the other provinces going to agree to be totally dominated by Ontario without even the check-and-balance of the larger Quebec that used to be around? That's a political difficulty. I can tell you, it would be totally unacceptable in Western Canada.

So what do you do about that? You can talk about a Triple-E Senate. There are two problems with that. One problem is for Ontario. An effective Triple-E Senate gives the periphery control over the centre in one House of Parliament. An effective Triple-E Senate in a new country like that would in effect lead Ontario towards subsidy for the Atlantic provinces and economic development in the West. I think you might find that difficult to swallow. From the point of view of Western Canada an effective Triple-E Senate (which some Westerners who have always supported Triple-E are just starting to understand) empowers the centre just as the United States Senate does. Westerners, in fact, want to escape the influence of the centre at least to some extent. So there's a difficulty with that solution. You have a political problem in addition to a financial problem.

Now let's look at the balance of policies that we have worked out in agonising ways over many years in Canada. The politics are still very controversial. The language accommodation we made with bilingualism, that one is simple: if Quebec is gone, bilingualism is gone.

Cultural policy: federal government has been a very important player in culture by giving a billion dollars to the CBC and billions in other areas as well. The federal largesse on culture has always been justified on the basis that it sustains national unity. At this point, national unity will be gone.

Aboriginal policies. Again very controversial; in different parts of this country for different reasons. The only solution I can see in a nine-province reconstituted ROC is a decentralisation of aboriginal and other policies like immigration and multicultural policy and trade policy. The bargaining would become very hard. But bargaining there should be, because fragmentation (which is the alternative) is a very bad scenario for almost all Canadians.

In Plan B, we did some modelling as to what might happen to the regions of the country, on the assumption that it breaks up. We made the hypothetical prediction. Transfer payments would cease as deficit financing ceases, because you can't borrow money in an air of political uncertainty. These are very draconian assumptions and they produce draconian results. This is just a first-order model. I'm not pretending this is exact in any way. If you take that effect, you find that the standard of living in the Atlantic declines almost 30 per cent, in Saskatchewan and Manitoba around 13 per cent and nine per cent in Quebec. Ontario, on first-order effects, does a little bit better. For Alberta and BC, it's about a song. But for many parts of this country, it is absolutely devastating. And this is before considering the transitional effects which can be very very rough.

So I think fragmentation is not what we want. Decentralisation, by contrast, has a lot of charm. I'm not going to bash Ottawa. I'm going to praise the alternative. Decentralisation, I think, is good in its own right. It is better in terms of accountability and responsiveness of government. It is good in terms of experimentation.

If you recall, there are two philosophical reasons for this great invention of federalism in our political history. One is the very important concept that the more governments there are, the better is the defence of the citizen against the monolithic state. The other reason is that federalism allows for experimentation between various jurisdictions. We look to Ottawa now to preserve medicare, but very few of us remember that Ottawa did not invent medicare. Indeed it was highly doubtful about it. It was invented in Saskatchewan by a provincial government. Federalism does allow for experimentation in various government programmes.

You can still have some national standards by agreement, although as a practical matter, I think that the political realities guarantee national standards. Nowhere in this country, no matter what kind of government we have and whether there is a federal government or not, is our society going to allow people to starve to death. We have broad agreement on a lot of these things. Decentralisation is good in efficiency, just from a managerial point of view. So many of you here in the corporate world understand that so well. There's a couple of other very good things decentralisation does. It maintains an association north of the 49th parallel, called Canada. If it is done in time, it brings an end to separatism, because it opens that third door to M. Parizeau's box. And you know, a funny thing about decentralisation is that some of us might be dubious about it, but nobody hates it. Except Ottawa and Jacques Parizeau. Maybe that's something worth thinking about?

I'm not going to say too much today about the shape of decentralisation. We will be doing more work on that as the year unfolds. Some things, I think, are fairly obvious. It means a considerably downsized Ottawa, but it also means building up from the other end. We must maintain in Canada what I call our "international personality." We must have continuity of treaties. We must have continuity of law. We've got to have a common market.

So those are all questions for the future that I hope we will all debate. I want to conclude now by talking just a little bit about how we get there, if we have to. If, that is, I've convinced you that we should think at least a little about this. There is now a firm constitutional convention in this country that any constitutional change of significance has to go to a referendum, province by province. What that says to me is that any new structure of Canada has to be referendum-proof. To be referendum-proof nowadays, you have to be trusted. I'm not sure that the old First Ministers' Conference model is trusted anymore. I don't think it would work to build a new constitution for Canada. Remember, none of our First Ministers were elected for constitution-building; almost none of them would be trusted to build a new constitution. Nobody was elected to represent us in this most fundamental of things.

The only route that I have found (and I'm open to others that would work and has worked all over the world) is the model of a constituent assembly whereby citizens are directly elected. I won't trouble you with the details, but there are ways of ensuring that these are pretty knowledgeable people and, most importantly, that they are very well advised by governments and others. Most of the political establishment is absolutely opposed to the concept of the referendum on constitutional matters. I understand this. It is very human. And the establishment will oppose it, perhaps until it's too late.

In my book I refer to three plans: Plan A, which is what we have today and what M. Chretien says he will without doubt preserve; Plan B, which is either a managed or unmanaged redistribution or fragmentation; and Plan C, which is described in my chapter 10 and which is a managed restructuring.

What are the odds? I give Plan A 40 per cent. Some would say that that is too high, but it has got that great inertia going for it. Plan B I'd give about 40 per cent. It has Parizeau and his rather confident group going for it. Plan C, which I think is the right one, the sensible one for Canada, has maybe 20 per cent. I think we have to shift those odds. Decentralisation, in my opinion, is a winner for just about everyone in this country. I think if it comes to it, the people of Canada may have a choice to make: decentralization and a lot less Ottawa, or status quo leading to no more Quebec and maybe no more Canada.

Less Ottawa or less Canada? I have no problem with that choice and I think it could be the real choice we will face.

The appreciation of the meeting was expressed by John Campion, President, The Empire Club of Canada.

Decent Intervals and Proper Distances

I would like to reflect on nationalism. Language and culture have been two of several components of nationalism. For France, and therefore for French-speaking peoples around the world, who claim an historical consciousness and destiny together, the use of language and culture as a unifying political force, dates back to the ordinance of Viller-Cotterets in 1539. From that date forward, the French language became the unifying political force in France. The French Revolution of 1789 gave a new dimension and political meaning to nationalism. That passion for nationalism was shared with the peoples of Europe and ultimately, with peoples around the world.

Nationalism was a major force during the politics of Europe and the world as the 19th century turned into the 20th. The concept has been constantly transformed from 1789 to date. It became the basis, with the help of Woodrow Wilson, upon which imperial rule was ended allowing the emergence of independent Third World countries.

But, nationalism in the late 20th century has been critically reviewed by Professor E.J. Hobsbaum in his brilliant 1985 lectures on nations and nationalism since 1780. He describes the nationalist movements in our time, with a particular focus on Canada, as essentially negative and divisive, intensified by petty bourgeois linguistic nationalism, combined with future shock.

If Professor Hobsbaum is right, while we discuss the potential breakup of Canada and plan for that possibility, we must never give up our dream that Canada can and should continue. It is a tolerant and wise land where passions of the day are given "decent intervals" and "proper distances"--so that ambiguity can play its healing role for the good and the genius of Canada.

Quebec continues to be a central political issue in Canada. Mr. Gibson has given us a warning that we be prepared for separation--its costs and problems. Thank you for your insightful addition to this important national debate.