Four Months Later
The Empire Club of Canada Addresses (Toronto, Canada), 17 Mar 1977, p. 297-309
Parizeau, The Honourable Jacques, Speaker
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Item Type
A joint meeting with The Board of Trade of Metropolitan Toronto. The address takes place four months after the November 15 election in Quebec. A survey of the diagnoses of the electoral victory won by the Parti Québécois and of the meaning of that victory. The idea and goal of political independence in Quebec. A brief historical review and discussion of the present situation. A detailed review of the financial aspects of Quebec independence, with examples. Possibilities for a referendum. Industrial projects. Threats of withdrawal of capital. The financial relationships between Quebec, the other provinces, and the federal government. Comments on the emotions and vague statements concerning the situation in and with Quebec. Quebec on the road to independence.
Date of Original
17 Mar 1977
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Full Text
MARCH 17, 1977
Four Months Later
JOINT MEETING The Empire Club of Canada and The Board of Trade of Metropolitan Toronto
CHAIRMAN William M. Karn, President, The Empire Club of Canada


Mr. Minister, Reverend Father, distinguished guests, mesdames et messieurs: C'est avec plaisiz que j'ai le grand privilege de souhaiter la bienvenue de votre part a I'Honorable Jacques Parizeau, Ministre des Finances et Ministre du Revenu de la Province du Quebec. In 1844, a group of Toronto citizens, including Mr. John McMurrich, concerned with the economic development of this community, formed the Board of Trade. Today, 133 years later, its successor organization continues that finest of traditions of its founders. On behalf of its 15,400 members, it is making a significant contribution in shaping not only the commercial growth of this region, but also the academic and cultural achievements of its institutions, and the quality of life of Canadians of diverse heritage who represent the life blood of this ever expanding metropolitan region. And our areas of interest reach out to the extremities of Canada as a whole.

Since 1903, within the framework of this prosperous, thriving environment, The Empire Club of Canada has played a commendable role in providing a public forum and publishing, through the Empire Club Foundation, the addresses of statesmen from coast to coast and around the world for the benefit of present and future generations of Canadians. In keeping with this objective, we have been honoured this year by speakers from Prince Rupert to St. John's, Newfoundland, from Peking and Tokyo to Washington and London.

We seek to be informed not only upon national but also upon international issues, and through this mechanism we hope that we may be able to make some contribution to the strengthening of Canada in particular, and that Canada in her turn may continue to make some contribution to the strengthening of the world in general.

It was therefore only natural, as I advised our weekly audience on November 18th, that we should invite the Honourable Rene Levesque, Premier of la Belle Province, to honour us with a visit, and acquaint us with the objectives of his newly-elected governing body in that much respected neighbouring province of Quebec, as has been the custom of his predecessors, six of whom have addressed our club.

Arising out of that request and parallel approaches by the Board of Trade of Metropolitan Toronto was the very generous offer of the Honourable Jacques Parizeau, Ministre des Finances et Ministre du Revenue, to come to this financial centre to discuss with us matters of great significance to our collective future well being.

We are delighted to join forces today with the Board of Trade of Metropolitan Toronto to provide the Honourable Mr. Parizeau with an influential audience, representing the broadest possible spectrum of financial, commercial, political, professional, and academic activity in this heart of Ontario.

Our guest of honour is eminently qualified for his present responsibilities. After obtaining his Bachelor of Commerce degree from L'Ecole des hautes etudes commerciales at the University of Montreal in 1950 he earned degrees from l'Institut d'etudes politiques de Paris in 1952 and a doctorate in economics from the London School of Economics in 1955.

He then returned to his alma mater in Montreal as a professor and from 1961 to 1967 also served as a consultant on economic and financial matters for the Quebec cabinet. This led to his appointment in 1967 as an advisor to Premier Daniel Johnson.

His political philosophy agreed with that of le Parti Qu6b6cois which he joined in 1969, serving as its president in 1970 and 1971. He won the seat of I'Assomption on their behalf on that memorable day, November 15th, 1976.

Mesdames et messieurs, c'est vraiement un honneur de vous presenter I'Honorable Jacques Parizeau, Ministre des Finances et Ministre du Revenue de la Province du Quebec.


Mr. Chairman, ladies and gentlemen: It is somewhat reckless to present, in a few minutes, a sort of overview of what has happened in Quebec over the last four months. However, I suppose everyone recognizes the importance of the election that took place on November 15, and we will probably need, every few months, both inside and outside Quebec to survey the paths followed and the views ahead, until such time as a political conclusion is attained. I recognize, of course, the difficulties involved in the sort of survey I just announced, and needless to say, there are inevitably strong personal biases in what I am going to say. There is no way for me to be impartial, no more than there is for those directly involved in the present discussions.

There have been an incredible number of diagnoses of the electoral victory won by the Parti Quebecois and of the meaning of that victory. It is not a simple matter. The idea and the goal of political independence are fairly recent in Quebec. During the early 1960's, at a time when Mr. Jean Lesage was making profound inroads into the powers and the resources of the central government, the independence movement, while very vocal, was in fact limited to groups. In 1966, two separatist political parties fought the election and while they mustered together less than 10% of the vote, they were instrumental in Mr. Daniel Johnson's victory. However, it is only in 1970 that the Parti Quebecois took part in an election, and at one blow got 23 % of the vote. I think all commentators were aware that the independence of Quebec was at the very centre of that election. At the next one, in 1973, the campaign was run essentially on the economic consequences of independence. The P.Q. got 31 % of the vote. Then came the election of 1976.

Present interpretations would have it that the independence of Quebec was not the main issue. It is true, of course, that as far as the Parti Quebecois was concerned, the issue of good government took precedence, and the achievement of independence was directly linked to a referendum. This, however, did not impress the government of the day. Its campaign was squarely built around the theme of "No to Separatism". And it was a washout. If some people find today some consolation in the thought that pro-separatists did not win, they must also recognize that anti-separatists quite explicitly lost.

In fact, this kind of analysis is pretty futile. The Parti Quebecois is linked to the idea of independence in the minds of all. Its objective has not changed now that it's in power. And for those who might have doubts or hopes to the contrary, the New York speech by Premier Levesque was as clear as it possibly could be.

I recognize, of course, that every utterance of every spokesman of the present government is scrutinized to see whether there cannot be here or there a semblance of withdrawal from the main objective. We have seen an example of this as late as last week. Yet this is wishful thinking. Something that started more than fifteen years ago is now coming slowly to fruition. The referendum is the next step, and politics in Canada for the next two years will be dominated by that event.

Indeed, in some financial circles, the New York speech was considered as foolhardy and reckless. According to many, the Parti Quebecois should have, for a while, avoided two issues in its public presentations: its social democrat platform and its objective of independence. Only in so doing could confidence in Quebec's credit and economy be maintained.

With respect to social democracy, it was fairly easy to give reassurances to those who felt that what was intended for Quebec was some sort of Cuban experiment. One could show, by simply falling back on the explicit P.Q. platform and political program, that a lot of what was proposed were forms of modernisation that in one shape or another can be found in other provinces or at the federal level. Why, for instance, could Ottawa reasonably embark on the reorganization of the aircraft industry or in Petrocan, or Saskatchewan in the control of potash mining, while an analogous operation with respect to asbestos in Quebec would be considered as dangerously Bolshevik? Similarly, the sort of ideas that the new government has with respect to automobile insurance are not precisely original in the present Canadian context. And the political mileage made in some quarters with the recent rise of the minimum wage in Quebec corresponded to a hike of 4.5 per cent from the level established by the previous government.

All of this can be explained easily and some early apprehensions have withered away over the last couple of months.

The issue of independence, however, has remained very much at the forefront. How easy it would have been to avoid a spread between Quebec and Ontario bonds, if only one could have been silent on that distasteful political question! How forthcoming money would have been! How much more secure everyone would have felt!

There was just one snag to this kind of pressure. Every time the government has changed in Quebec, the bottom has dropped out of the market for Quebec bonds for a few months, at least in Canada. The worst spreads between Ontario and Quebec have not been since the P.Q. took power, but rather oddly at the time of the advent of Mr. Bourassa's government. For those who came to power in November 1976, this was well known.

The risk was with respect to the New York market and the January speech. In the U.S., there never had been systematic and politically significant spreads between Ontario and Quebec. The considerable success, early in January, of the public loan floated in Germany, showed that in effect, the political objective could be clearly stated without dire consequences. Thus, while it is true that after the New York speech, spreads in the U.S. between Quebec's bonds and those of other provinces climbed significantly, disruption was not to be expected, as long as the Quebec government acted in a financially responsible manner.

And that, of course, it has tried to do over the last few months. The drawn-out quarrel between the provincial authorities and those of the city of Montreal over the latter's short term debt for the Olympic games was settled right away. The objectives set for the next budget have been marked by considerable prudence. Social programs that were announced were limited in scope as well as in costs. In financial dealings with the federal government, Quebec readily accepted to abide by the rules set by the other provincial governments, with respect to fiscal arrangements.

While the word of the day was uncertainty in so many financial circles, the Quebec government has managed to complete the huge borrowing program it had inherited from the previous government for 1976-77, and preserve at the same time the considerable advance in borrowing that Quebec Hydro had achieved. Spreads on the bond market, both in Canada and in the United States, have started to fall slowly but significantly. Moody's announced last week that the AA rating for the Quebec government and Quebec Hydro had been maintained. Uncertainty was, maybe, less dramatic than most had thought.

Over the last few weeks a new theme has started to circulate, which is, in a sense, much more potent and in any case more interesting. It runs as follows: if Quebec becomes independent, it can in no way count on an economic association with Canada. The reaction would be far too severe in Canada for such a kind of proposal to be acceptable. If this were true, it would be indeed rather serious. The Quebec market is a small one. It has always been assumed that, should independence come, a customs union would be maintained between Canada and Quebec. Other aspects of an economic association have been discussed, such as a monetary union. But while such other aspects might be useful or simply convenient, none had the crucial importance of a customs union.

According to recent commentators, a number of industries important to Quebec such as textiles, clothing, shoes or furniture are highly protected by the Canadian tariff. Canadians would not accept, if Quebec became independent, to shoulder the burden of such protection. Thus Quebec would have to fall back on its own market and its own resources.

One cannot avoid the thought that such an argument, while possibly excellent as a political threat, is pretty bad economics. Tariff barriers between Quebec and the rest of Canada might not hurt the west very significantly but they would produce in Ontario intolerable losses, just as they would on the other side of the Ottawa river. The argument as to which province would be hardest hit, is academic. Both would be in a frightful way. And so, of course, would be the economy of the Maritime provinces. Free passage of goods and people is the only way out of this situation. It is not only a wish, it is a fact of life.

We, on both sides of the Ottawa river, are condemned to be reasonable. Montreal and Toronto live, economically speaking, like each other's suburb, and on both sides a number of plants have been built and tooled to produce for both markets. No amount of political squabbling will obliterate that fact, and corporations will be the first to bring governments back to ground level, if they ever tended to forget the basic realities. While it is perfectly legitimate and, in fact, essential, that various scenarios of economic association be examined and studied; while one can also understand that some people refuse flatly to get involved in such discussions, because it would be an implicit recognition that the independence of Quebec is possible, I feel that at least on the basic issue of a customs union there is not very much that one can add to the acknowledgement that there is no easy path around it.

Be that as it may, the simple announcement of a referendum during the first mandate of the present Quebec government would, in itself, be a factor of uncertainty that would induce investors to postpone new projects in Quebec until such time as the political future has become clearer. A number of observers are convinced that this is true and, as far as they are concerned, this reluctance to invest should keep a low rate of growth of the economy for a few years.

Theoretically, there is something to be said for this kind of approach. Yet present circumstances are such that the rate of growth in the near future should not be as low as has been expected. In fact, it might be higher than had been assumed two or three months ago. There are reasons for this.

Three very large industrial projects are presently under construction that are directly linked to government initiatives. The purchasing policy adopted by the new government is already having some effect. But, mostly, because industrial investment has been so low lately, some increases in capacity, at least in certain sectors, were forthcoming. Furthermore, after a period of acute housing shortage in Montreal and other cities, an increase in housing investment is inevitable. And finally, some fairly limited shifts in public expenditures away from highly capital intensive projects, such as major highway construction, towards more labour intensive public projects particularly in agriculture, forestry and municipal works, should improve economic performance in a number of outlying areas.

There is no great merit in such results, but those who expect that investments in Quebec for 1977 will show clearly the results of political uncertainty will be surprised by the investment plans when they are released by federal authorities in a few days.

In fact, one has to recognize that external investment in Quebec over the last few years has not been the backbone of the economy. Three quarters of all industrial new jobs were created by small and average size companies, usually home grown. In the same way, the recent bond issue of the government of Quebec was sold essentially to Quebec accounts. In fact, most of whatever growth there is in the economy is due to domestic sources. To assume that such sources of capital and entrepreneurship are highly mobile is largely the outgrowth of the simple economic models that enchanted our youth when, in the blessed atmosphere of the universities, we were all introduced to the delicacies of Ricardian economics. In practice, that kind of entrepreneurship is not mobile at all. It becomes so only when it has reached a certain threshhold, a given size.

Insofar as the new government tries to create an atmosphere conducive to labour peace, is committed to a certain prudence in the use of public funds and therefore of taxes, and sticks to the rules of the game that help rather than hinder the local entrepreneur, there should be no major problem in the growth and development of the Quebec economy. And, obviously if the local entrepreneurship is prosperous, external capital will, in addition, be forthcoming.

Threats of withdrawal of capital from Quebec at the present time can be useful for some groups as a political weapon. But as an economic instrument, they are largely worthless. There is nothing to be gained by assuming that the fall in property values in Westmount is a national crisis. If it means that French Canadians can buy such properties at bargain basement prices, they certainly will not complain.

Similarly, insurance companies which think it is a worthwhile proposition to gather premiums in Quebec and invest them outside, are going nowhere. Either with the help of a recent Supreme Court decision, the Quebec government can pursue its efforts to establish a specific relationship between actuarial commitments and local investment, or else that relationship will be established once Quebec has become independent, and, at that crucial time, an inflow of capital will be forthcoming if such companies still wish to keep their business in Quebec.

And in any case, all such discussions are of limited importance in relation to that momentous decision that will have to be taken shortly with respect to pension funds. As we all know, in 1964, the federal government proposed a pay-as-you-go formula for what became the Canada Pension Plan. The Quebec government at that time, led by Mr. Lesage, insisted on a fully-funded formula. As is usually the case, we finally came to a compromise. The Canada and Quebec pension plans would be partially funded. The obvious result is that we are now reaching a point where contributions must be raised and therefore where an additional slice of private savings must be channeled to the public sector.

The province that first raised this issue was Ontario. And it is obvious that Quebec will follow suit. Our own pension fund is geared not only to the purchase of government, municipal and Hydro bonds. It is also the largest portfolio of common stocks in Canada and plays a significant role in mortgage funds. Thus any decision to increase money available to the Quebec Pension Plan also increases money available for the financing of corporations, and reduces calls on the bond market by the government.

One can accept a lot of what I have just stated and still have serious doubts as to the viability of an independent Quebec. After all, governments in our day have ways and means of weathering a temporary crisis. But what about longer term perspectives? Can an independent Quebec manage without the financial and fiscal help that few people doubt it has managed to derive until now from Confederation?

In a sense, this is the crux of the matter. This is the sort of thing that should have been discussed over the last few years. Unfortunately, it has not yet been properly analysed.

Two statistical series are, in this respect, absolutely crucial. The first has to do with the taxes that Quebecers pay to Ottawa and the expenditures that the federal government incurs in Quebec or for Quebec. The second set of figures has to do with the balance of current accounts of Quebec with the rest of the world.

The first series should show whether by withdrawing from Confederation, Quebec will lose the net contribution that Ontario, Alberta and British Columbia feel certain that they are extending to the so-called "have not" provinces. Equalization payments have symbolized for quite a few years that contribution.

The second series should show how well or how badly the Quebec economy and its own currency (if it had one) would manage if independence occurred.

Both series normally come out from (Quebec) national accounts, or should I say "provincial" accounts. While they have not often been discussed in English Canada until recently, they both have been the object of violent discussions in Quebec. At the time of the 1973 election, the national accounts for Quebec which had been computed for ten years (from 1961 to 1971) and had not been published, were stolen and thus made public.

What they revealed was that Quebec had for nearly all years, received less from Ottawa than it paid to Ottawa in taxes. Furthermore, Quebec balance on current accounts had nearly always shown a surplus, and a very sizeable one at that.

The reason put forward by the federal government for not publishing the complete series was that the results were incompatible with those of other calculations (the inputoutput tables) and thus that statistical reconciliation was needed. Some figures were made public, others never were.

A little later, the prime minister of Quebec forbade any further calculation of such series. He reacted more or less as if the prime minister of Canada, threatened politically by inflation, forbade the calculation of the cost of living index.

The Quebec premier should not have been that nervous. It became obvious by the end of 1973 that the oil crisis was changing the general picture. Eastern Canada was now getting subsidies on the price of oil imports that would show that Quebec was getting more from Ottawa than it sent in taxes there, even if this additional inflow was of a temporary nature. Because of the large increase in the price of imported crude, the balance on current account should, normally, show a deficit as is the rule for most countries that do not produce oil.

Be that as it may, the federal government got into the statistical act. Provincial accounts were drawn for all provinces. And the figures are now ready to be published. All eleven governments know what they look like and it is now a matter of weeks before they become available. What Maclean's Magazine has tried recently to drum up is really a rough and incorrect sketch of what all governments will be comparing later in the spring.

Somewhat on purpose, I have been rather technical. I hope that, at this point, it should be quite clear that there are specific reasons for this. I feel that over the last few weeks, a great deal of emotion and needlessly vague statements have been flying around. Canada, in all of its parts and through all of its constituent elements, has until now been fully scrutinized. Few countries in the western world have such a well trained and technically expert civil service. There is no reason, really, why we should react to a new political situation as if, suddenly, we were confronted with a vacuum of facts and figures. Politicians cannot react as if they were taken by surprise. The inner workings of Confederation are well known.

In conclusion, I cannot avoid recalling the anxiety of Premier Roblin requesting in the middle sixties some set of natural priorities, the need of which was quite obvious. I cannot recall without some pain the remarkable understanding of Quebec that Premier Robarts could muster in critical situations. Premier Lesage was a staunch federalist and so was Premier Robichaud. All those men in the middle 60's, when there was still time to change and possibly save Canada as we have known it, failed not because of their lack of merit or their lack of insight, but because of complete insensitivity on the part of a federal government that never really understood what was going on in Quebec.

I think that we, as Quebecers, have now reached the point of no return. I am deeply convinced that we can manage on our own. The referendum will be the test. I sincerely hope that in this process of the emergence of a new country, we can keep with our closest neighbours, the confidence, the good faith, and the common interest that history, geography and economics have bestowed upon us.

The appreciation of the audience was expressed by Mr. A. R. McMurrich, President of the Board of Trade of Metropolitan Toronto.

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Four Months Later

A joint meeting with The Board of Trade of Metropolitan Toronto. The address takes place four months after the November 15 election in Quebec. A survey of the diagnoses of the electoral victory won by the Parti Québécois and of the meaning of that victory. The idea and goal of political independence in Quebec. A brief historical review and discussion of the present situation. A detailed review of the financial aspects of Quebec independence, with examples. Possibilities for a referendum. Industrial projects. Threats of withdrawal of capital. The financial relationships between Quebec, the other provinces, and the federal government. Comments on the emotions and vague statements concerning the situation in and with Quebec. Quebec on the road to independence.