Is Saskatchewan the counter-example?

In response to my op-ed about the addition of new seats to the House of Commons in the Globe of 26/9/09, one reader wrote in with a familiar objection:

Brian Lee Crowley, in attributing Quebec’s loss of national political influence to its pursuit of a “big state strategy” , conveniently chooses to overlook a province that does not support his thesis. Saskatchewan , with its family of crown corporations and large public sector, is currently a national leader in economic growth, investment and in migration. Even the recently elected Conservative government has chosen not to interfere with this arrangement, recognizing that its low cost infrastructure and public services provides the province with an economic advantage.

Busted! My whole thesis has just been disproved and my career is in tatters because I forgot about Saskatchewan.

I don’t think so.

Back when Saskatchewan was a bastion of Canada’s founding values, a vigorous work ethic, small government and low taxes, it rapidly grew to become the third largest province in Canada by population. Alberta was its poor cousin. Both provinces have magnificent resource endowments. Both provinces faced the same commodity-based economies, boom and bust cycles, etc. Tommy Douglas used the provincial government to broaden access to health care and to build infrastructure, but made it very clear, as I show in the new book, Fearful Symmetry, that he had no interest in creating big social welfare programmes that might create dependence. He was a vigorous advocate of workfare. When equalization was first put in place in the late 1950s, Alberta was a recipient, as was Saskatchewan. Saskatchewan, not Alberta, was tipped in the early days to be the centre of the western oil and gas industry.

Then what happened?

Saskatchewan largely lost its way. Oh, it didn’t go badly wrong, as Quebec and much of the Atlantic provinces did. But it didn’t get things right either, as its very similarly situated neighbour, Alberta, largely did. Saskatchewan rubbed along for years, no economic out-performer, but no basket case either. Some years it was on equalization, some years it was off. The anti-business attitude of the government scared off the oil and gas industry, which set up shop in Alberta, which had a much more encouraging tax and regulatory regime. When the CCF became the NDP, policymaking soon became more heavily dominated by public-sector unions, who naturally favoured big government, high taxation and high levels of public sector employment. For an economic model that the Globe’s letter writer celebrates, it hardly created an economic powerhouse. Most years Saskatchewan’s population barely grew, the province lost population relative to the rest of the country and it attracted no immigration to speak of.

Over the last 35 years (1973–2007), the population of Saskatchewan has
grown from roughly 912,000 in 1973 to its current level of 997,000 in 2007
(9.3% growth). This stands in stark contrast to the population growth experienced
by Alberta (101.4%) and British Columbia (85.0%) over the same
period. Even neighboring Manitoba (17.8%) managed to post population
growth that exceeded that of Saskatchewan. Indeed, Saskatchewan’s population
growth of 9.3% (1973–2007) ranks ahead of only Newfoundland &
Labrador, which actually experienced a decline in its population of 7.2% over
the same period.

Private investment levels were poor:

In terms of net business investment per worker—the accumulated
investment by business (adjusted for the number of workers and inflation)—
Saskatchewan fairs [sic] poorly for the period between 1978 and 2007 when
compared to the western provinces and the national average. As of 2007,
Saskatchewan ranked 9th among all Canadian provinces in terms of net business
investment per worker. Indeed, Saskatchewan’s performance was only
49.4% of the national average as of 2007.
The results for the more narrow measure of business investment,
namely net business investment in machinery and equipment (adjusted
for the number of workers and inflation), are equally as poor. By 2007,
Saskatchewan had the lowest level of accumulated per-worker net business
investment in machinery and equipment among all Canadian provinces.
Indeed, Saskatchewan’s performance of $7,175 in accumulated net business
investment in machinery and equipment in 2007 was only 38.1% of the
national average, 73.0% of that achieved in Manitoba, and just 15.8% of that
achieved in Alberta.

Saskatchewan suffered from  many of the dysfunctions of Quebec, with the happy exception that, being next door to BC and Alberta, it could export its unemployed and many of its retirees.

Our letter-writer now claims that Saskatchewan’s big government model explains its current economic success. But then that model was the one that was in place during the years of relative economic under-performance as well, and so he must accept that the model is responsible for that under-performance. He can’t have it both ways. The really interesting question, then, is why are things different now, because it is certainly true that Saskatchewan is enjoying a bit of a boom and may be the only province to grow in 2009.

No doubt many things could be mentioned, but here are two that I think are key: lower taxes in Saskatchewan and policy fumbles in next-door Alberta.

Since 2001, Saskatchewan has been converging on the low tax policies of its neighbours to the west after years of high taxation. In 2001 the province reduced personal income tax rates and raised the thresholds at which those rates kicked in. In 2006, the NDP government our letter-writer praises for their left-wing bent, took a leaf from the copy book of nasty neo-cons like Ralph Klein and Gordon Campbell and cut corporate taxes. And not by a little. The CIT rate went from 17% to 12% (i.e. dropped by about a third) and those particularly nasty corporate capital taxes were largely eliminated.

Next door in Alberta, the government launched a review of the royalty regime in the oil patch just at the moment of the collapse of prices. The certainty and good business climate the industry had enjoyed for years were badly damaged. Exploration and development activity has fallen sharply. Premier Wall of Saskatchewan went out and made it clear to the companies that his province was now open for business, and they have come in significant numbers to check out the new business climate. Ed Stelmach is celebrated in Saskatchewan as the province’s biggest supporter.

Other decisions are helping. The removal a few years ago of the restrictions on non-residents owning Saskatchewan farmland have increased investment in the province. A few minor changes to the interprovincial-trade deal throwing open cross border trade between BC and Alberta (the so-called TILMA), has made it possible for Saskatchewan to sign on in just the last few days.

As for the alleged superiority of the Crown corporation model in Saskatchewan, the evidence for this claim is poor as well. While the current government may have had to promise not to privatize on a large scale in order to minimize attacks by the province’s extremely well-organized, well-financed and vocal public sector trade unions, the evidence is poor that the Crown model has served Saskatchewan well. Just one example: the privatization of the Crown telephone service in next door Manitoba gave an excellent chance to compare the two models. The result:

Ten years after the Manitoba government devolved MTS, the results for company size and profitability are dramatic. Despite slight advantages to SaskTel early on, MTS today earns twice the revenue, has three times the assets and employs 20 per cent more people.

Since the telecommunications market is highly competitive and federally regulated, MTS could not have achieved such growth by gouging customers or providing a more inferior product. In fact, service levels in both provinces remain essentially similar according to a Frontier Centre analysis of prices, geographical coverage and numbers of customers served. Nonetheless, the differences between MTS and SaskTel are vast, and the only noticeable cause is their ownership model.

Saskatchewan has momentum, but it has absolutely nothing to do with the legacy of tired old policies of the past. Even the NDP was jettisoning those policies before they lost power, and the Saskatchewan Party is pushing in the same direction. Apparently the Globe’s letter-writer is one of the last Saskatchewan residents still yearning for policies abandoned even by the province’s social democrats.

Rep follows pop

Some readers of this blog will have noticed that the Globe’s front page story yesterday concerned the yet-to-be announced plans of the federal government to add roughly 30 seats to the House of Commons, taking it to approximately 340 seats from the current 308. Those same readers may have also noticed that this was immediately followed by nationalist sabre-rattling in Quebec and craven commentary by so-called “experts” to the effect that Canada might well not survive an attempt to guarantee that the votes of all Canadians might have roughly equal weight in the election of the Commons and therefore the government of Canada. Check this out from the Montreal Gazette:

Bloc House leader Pierre Paquette noted that Quebec’s National Assembly had adopted a motion unanimously denouncing the federal government’s previous attempt to redraw the electoral map. He said the issue would give Quebecers an additional reason to turn away from the Conservatives in the next election.

“I’m convinced there will be a public outcry in Quebec over the Conservative proposal,” said Paquette. “For us this is a major issue, and I think it shows once again that the Conservatives have crossed out (appealing to voters in) Quebec.”

Even Michael Ignatieff succumbed to this shameful pandering, trying to make an attempt by the government to level the electoral playing field appear to be a Tory plan to do down Quebec, a province that, like 6 others, will receive no new MPs.

Only the growing provinces that have remained closest to Canada’s founding values, BC, Alberta, and Ontario, will get new seats. And they’ll do so not as a result of some mean-spirited political plot, but because those are the successful dynamic parts of the country where more and more Canadians live. That’s what believing in lower taxes, smaller government, a strong work ethic, well designed social programmes, economic growth, openness to immigration and so on will do for you.

For my take in this issue, have a look at the op-ed I wrote in today’s Globe (26/9/09), in which I draw on research in Fearful Symmetry to show that Quebec’s loss of demographic, economic and political weight is the direct outcome of the bidding war for the loyalty of Quebeckers, and that this loss of power and influence cannot be ignored in our political institutions. Indeed I point out that this is just the beginning of the coming shift in political power. By 2031, on current trends, Quebec should expect to have only 75 seats out of 375, with virtually all of the oncrease going to the new power coalition of BC, Alberta and Ontario. They have the people — they get the votes.

The nerve and hypocrisy of the extreme elements of the nationalist movement in Quebec never ceases to amaze me. Here are Gilles Duceppe and his colleagues saying that Quebec’s weight in parliament must not fall; they promise to do everything they can to frustrate the new seat distribution. These are the same people who, in the name of sacred and inviolable democracy, say that any vote by Quebeckers to leave Confederation is final and unquestionable. Apparently, however, they have no problem with waving democracy (in the form of one person, one vote) aside when its application may be inconvenient to them. Have they no shame?

Fearful Symmetry in La Presse

I was asked by Andre Pratte, the editor in chief of La Presse, to prepare a brief overview of the argument in Fearful Symmetry about how Ottawa should accommodate Quebec in the coming years. Especially because the article (which appeared on Tuesday, 22nd September, 2009) does not appear on-line and is therefore not searchable, I reproduce the article as I originally submitted it below.

La fin de la surenchère

Paru dans La Presse du 22 septembre 2009 (cet article n’est pas disponible à l’Internet)

Par Brian Lee Crowley

La présence simultanée durant les années soixante d’une bulle démographique et d’un mouvement crédible prônant l’indépendance du Québec a déclenché une espèce de surenchère pour capter la loyauté des jeunes Boomers francophones. Des programmes fédéraux visant à rendre les francophones financièrement dépendants envers le Canada furent, par la logique du fédéralisme, généralisés à toutes les provinces.

Il en a résulté un Canada de nouveau composé de deux « nations », mais d’un caractère très diffèrent : une nation qui produit la richesse (‘Making Canada’, composé principalement de l’Ontario, de l’Alberta et de la Colombie-Britannique) et une autre qui la détourne (‘Taking Canada’, composé surtout des autres provinces, mais avec le Québec dans le peloton de tête).

Sans les changements profonds que la Révolution tranquille ainsi que la montée des Boomers ont enclenchés au Québec, le Canada n’aurait pas connu l’expansion démesurée de l’État qu’on constate depuis les années soixante. Cette dynamique est cependant en sérieuse perte de vitesse.

La surenchère opposant Québec et Ottawa a alimenté une croissance démesurée de l’État au Québec qui a, à son tour, miné la croissance économique, approfondi la dépendance d’une certaine couche de la population vis-à-vis de l’État-providence, multiplié les emplois improductifs dans le secteur public, renforcé le pouvoir de chantage des syndicats, des entreprises et d’autres groupes qui cherchent à s’abreuver à la fontaine des deniers publics, affaibli la famille, et encouragé l’émigration toute en décourageant l’immigration. Le poids politique, économique et démographique du Québec s’en est trouvé amenuisé, tout comme sa capacité de poursuivre la surenchère.

Selon Statistiques Canada, en 2031, le Québec représentera à peine 21 % de la population canadienne. Par contre la Colombie-Britannique, l’Alberta et l’Ontario compteront pour les deux tiers de la population et s’accapareront trois fois plus de sièges que le Québec à la Chambre des communes.

Cette coalition (Making Canada) représentera également 70 % de l’économie nationale. Comparée au Québec, sa population, sa natalité, son immigration, sa productivité et son niveau d’emploi seront tous plus élevés alors que son fardeau fiscal et son taux de retraites anticipées seront de beaucoup inférieurs. La pénurie de travailleurs qu’annonce le vieillissement des Boomers rendra cette région du pays de plus en plus réfractaire à participer au financement d’une partie non-négligeable de l’État-providence obèse du Québec.

Il va sans dire qu’un Québec qui représente une cinquième de la population et de l’économie continuera d’être influent, et tous ces développements auront aussi des conséquences positives.

Par exemple, l’invasion par Ottawa de bien des domaines de politique sociale a eu pour mobile la poursuite de la surenchère. Sciemment ou non, le gouvernement fédéral a ainsi fini par subventionner une série de politiques, notamment au Québec, mais ailleurs aussi, qui ont profondément endommagé les économies provinciales.

On pourra résoudre ce problème en mettant fin aux transferts fiscaux et en les remplaçant par un transfert de capacité fiscale. Lorsque les provinces auront à défrayer la note de leurs politiques sociales à partir de leurs propres ressources, elles seront plus attentives aux résultats obtenus.

En contrepartie, les provinces seraient appelées à reconnaître, une fois pour toutes, le rôle prépondérant du fédéral en ce qui a trait à la création d’un marché libre et sans entrave à l’échelle du Canada.

Le Québec s’opposera évidemment à ce renouvellement de la présence d’Ottawa dans la vie des Canadiens. Par contre, sortir Ottawa des politiques sociales de ressort provincial toute en s’enrichissant d’une partie de la capacité fiscale du gouvernement fédéral constituerait une victoire importante vu sous l’angle des revendications traditionnelles du Québec. Tout compte fait, on pourrait assister à un renouvellement du pacte confédératif qui sera dans l’intérêt de tous.

Brian Lee Crowley est auteur de Fearful Symmetry : the fall and rise of Canada’s founding values qui vient de paraître chez Key Porter.

What it all means

Two forces have shaped Canada profoundly in the last fifty years: the entry of  Boomers into the workforce and the rise of a separatist Quebec nationalism. Large-scale unemployment plus the threat of the breakup of the country caused Canada to jettison its traditional values—a ferocious work ethic, a commitment to the family as the most important social institution, a suspicion of overweening government and an aversion to dependence—in favour of a vast expansion of the welfare state. We rapidly became a nation of “takers” rather than the “makers” we had always been. But the tide is about to turn with a vengeance: the Boomers are retiring and Quebec nationalism is increasingly a spent force, presaging a resurgence of our founders’ values that had served us so well. Thought-provoking and meticulously documented, Fearful Symmetry will change the way you think about Canada.

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