Montréal, 5 août 2000  /  No 65
 
 
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Martin Masse is publisher of QL. La page du directeur.
 
NUMÉRO SPÉCIAL:
NOTRE TRADITION LIBÉRALE
 
THE SOCIALIST WIND FROM THE SOUTH
 
by Martin Masse
  
  
          As everybody knows, the United States is a mean country where dog-eat-dog capitalism reigns, where the poor die of hunger in the streets or of illnesses at the doors of hospitals whose treatments they cannot afford, and where rugged individualism is so strong that the state is not allowed to set up the social programs that would put some order in this anarchic jungle. 
 
          We in Canada on the contrary live in a gentler and kinder country where social harmony, sharing and compassion are the norm, where governments never hesitate to intervene in order to bring a measure of fairness and equality in the life of the community, and where there has always been a broad consensus on the need to keep and improve on our unique social programmes. We have to be proud of this identity as Canadians and protect it from the bad influences from the south. If only the Americans could become a bit more civilized and adopt the same values... 
  
American imports 
  
          Well, if that's how you see things, think again. This is not the reality but only official Canadian nationalist propaganda, which we are being fed constantly by Jean Chrétien and the whole Liberal-Conservative-NDP elite. The reality is a bit more muddled. Yes, American official ideology, as expressed in the Declaration of Independence, proclaims « Life, Liberty and the Pursuit of Happiness » whereas we, with our mixed heritage of French and Tory Loyalist collectivisms, prefer to emphasize in our constitution « Peace, Order and Good Government ». But these are only slogans, and throughout the history of our countries things have not turned out that way. Not until some decades ago anyway.  
  
          This is what William Watson explains in Globalization and the Meaning of Canadian Life. This excellent book, published two years ago, deals mostly with the effects of economic globalization on countries and what kinds of policies Canada should adopt to bring prosperity to its citizens. Mr. Watson, a McGill Economics professor and columnist for the National Post and The Gazette, argues that contrary to what many globalization theorists are saying, countries are not all becoming the same and we are still free to choose what kind of government we want. But « we should choose what is best for us, not what we are accustomed to choosing, or what we think our tradition requires us to choose, or, worst of all, what those south of us are not choosing. »  
  
          Mr. Watson is, of course, in favour of choosing policies based on the principles of the free market and a limited government. He explains that the Canadian identity based on interventionism and protectionism is in fact a myth, and that we're certainly not distinguishing ourselves from the Americans by trying to become more socialist, since the Americans were there before. In two chapters in particular entitled The American « Governmental Habit » and The American Lead, he shows that new interventionist and collectivist fads in various sectors of the economy and society have usually been tried first south of the border, and only later brought in to Canada. If the perspective is so skewed today, it is because we unfortunately succumbed more than they did to the lure of tax-and-spend solutions in the second half of the 20th century and now have a federal government much bigger than theirs. 
   
A bank and a tax 
  
          High income taxes are part of what distinguishes us from the Americans. Considering that we love so much being taxed, we surely must have implemented this form of legal robbery before the Americans did. Wrong! The USA had an income tax and a government-controlled central bank before Canada did. 
          (...) in the first decade of the nineteenth century, Congress had established a national bank, the Bank of the United States, a jointly owned, private-public undertaking, which, though far from fulfilling the functions of a modern national bank, was intended to help regulate currency and fiscal matters. Though in the 1830s populist President Andrew Jackson effectively stripped its successor, the Second Bank of the United States, of its ability to influence money markets, a measure of federal control was reestablished in the 1860s, while in 1913, twenty-two years before the Bank of Canada came into existence, the Federal Reserve Act gave Washington, in theory at least, as complete control over its national currency as a government may have. 
  
          Nineteen thirteen was also the year in which the Americans amended their constitution to allow for income taxation. Such a tax had been imposed on a temporary basis during the Civil War, and Congress had enacted one again in 1894, though it had subsequently been ruled unconstitutional by the Supreme Court on the grounds that it set different tax rates for different citizens, thus violating the constitution's requirement of equal treatment before the law. Our own income tax was not introduced until 1917, during the First World War. Thus, in spite of our supposedly more interventionist traditions, the allegedly anti-statist Americans had both an income tax and a central bank, two necessary accoutrements of modern big government, before we did. (p. 92-93)
Tariffs and other barriers  
  
          There are policies that we believe were instrumental in the creation of our country in the 19th century and that we think of as « typically Canadian ». Policies like protective tariffs and government-supported railway development are at the heart of our identity and distinguish our mode of economic development from that of the United States.We are surely the ones who invented them. Wrong! They are in fact American imports (of course, in many cases the Europeans were there even before) and have nothing particularly Canadian about them. 
          Another classic offence against laissez-faire doctrine is interference in international trade, whether by means of tariffs or by other trade barriers. Whatever its official ideology might ordain, the United States has always had an active and when necessary protectionist tariff policy. On July 1789, the very first economic act the new Congress undertook was to legislate tariffs to both raise revenue and restrict imports. (...) 
  
          As is always the case in trading nations, tariff policy has been source of continuing political controversy. In the United States in the nineteenth century, agrarian interests favoured free trade, while manufacturers often lobbied for protection a pattern replicated in Canada, and for the same reason: in the mid-nineteenth century British manufactures were simply too competitive. In 1854, the United States did negotiate a free trade agreement with the British North American colonies, which were prevailed on by London to agree to it, mainly for geopolitical reasons. But free trade did not last long. The Americans abrogated the Reciprocity Treaty twelve years later, after the United Province of Canada had both raised its remaining tariffs in an unfriendly way (in 1859) and been perceived as being sympathetic to the South in the Civil War. In fact, the abrogation of the Reciprocity Treaty is commonly cited as a main reason why the colonies of British North America decided, as of 1867, to form their own free trade area. With the agrarians and Democratic South prostrate after its conquest by the Union armies, the northern manufacturing interests that held sway in the Republican party were not content merely to undo previous liberalizations of trade, however. They also hiked tariffs substantially across a wide range of manufactured goods, and did so with the express purpose of encouraging American industrial development. (...) 
  
          A protective tariff was also the centrepiece of John A. Macdonald's National Policy of 1879, and it had exactly the same goals as the Republicans' tariffs: to encourage local manufacturing, raise revenue, and cement a sense of nationhood. But far from establishing Canadian uniqueness in our approach to policy, the National Policy tariff was both an imitation of and a strategic response to similarly high tariffs enacted for almost identical reasons by an at least equally activist American government. (...) Macdonald's finance minister, Leonard Tilley, « went so far as to import an assistant from the U.S. Bureau of Statistics to advise him on drawing up the new Canadian tariff schedule! » 
  
          The second and more celebrated leg of the National Policy was the building of a transcontinental railway, and in fact the CPR still holds mythic thrall over Canadians. (...)  
 
 
     « The Canadian identity based on interventionism and protectionism is a myth, and we're certainly not distinguishing ourselves from the Americans by trying to become more socialist, since the Americans were there before. » 
 
    
          It is almost certainly true that private interests would not have built the railway on their own: « Private enterprise never seriously considered building the C.P.R. without the financial assistance of the government » (George 1968: 741). In 1880, fewer than ten thousand Europeans lived in the Canadian northwest. Undertaking one of the world's greatest-ever construction projects to satisfy their transportation needs would have been one of the world's greatest-ever extravagances. As for a purely public railway, it was tried between 1873 and 1878 and was judged not to have worked: a royal commission reported in 1881 that the cost of the government-built portions of the railway was excessively high, partly because of widespread corruption and bid-rigging. In the end, what we think of as that uniquely Canadian amalgam private enterprise supported by public funding got the job done.  
  
          But it isn't a uniquely Canadian amalgam. The Americans thought of it first. Far from being unknown, public support for railways and before them roads and canals, was common in the United States, even if it was often provided by state and local governments, Washington generally being reluctant to participate, on the perfectly sensible grounds that financial support for merely sectional interests would lead to sectional resentments. The Erie Canal, built in the 1820s, was a mixed public-private undertaking, while between 1815 and 1860 almost 70 per cent of all canal investment in the United States was financed by public sources (Hugues 1977: 70, 71). In the new technology's first decades, government participation in railway building varied from as low as 10 per cent in the midwest, to as high as 50 per cent in the South. In total, in the years before the Civil War « more than 25 percent of the total railroad capital stock ... had come from public sources ... mainly state and local governments » (Hugues 1977: 72). (p. 93-97) 
A Canadian New Deal 
  
          During the 1930s Great Depression, the Roosevelt Administration adopted social democratic policies and launched major public works in order to create jobs for the millions of unemployed and lessen the impact of the crisis on the poor (it didn't work of course, but only made the situation worse). This so-called New Deal must surely have been inspired by the Canadian experience, right? Wrong! New Deal policies were adopted in Canada only a few years later and were, by the way, rejected in this haven of free enterprise, the province of Quebec. Of the two countries, Canada has been the most resistant to the socialist wave sweeping the world in the first half of the 20th century, and had the least activist government until the 1950s. 
          (...) Canada's initial reaction to the Great Depression was also cribbed from the Americans. The immediate American response was the infamous Smoot-Hawley Tariff, a protectionist fiasco by 1932, American imports were down to 2.3 per cent of GDP which obviously made the Depression much worse: if no one could sell into the U.S. market, who could buy there? R.B. Bennett's government responded with its own protectionist offensive, boasting that it would use tariffs to blast its way into the markets of the world. « The irony of Canadian anti-Americanism was never more obvious, » writes the historians John Herd Thompson and Stephen Randall (1994) « for these Conservative policies were the mirror images of Republican protectionism and nativism in the United States » (131).  
  
          Five years later, the « Bennett New Deal » was indebted both in name and inspiration to Franklin Roosevelt's. Like Roosevelt's, much of it ran into difficulty in the Supreme Court. To be sure, while the U.S. Supreme Court judged many of the original New Deal's regulatory innovations to be beyond the power of any American government, our jurists merely found Ottawa's initiatives beyond the power of Canada's federal government. The effect was similarly paralytic, however. It wasn't until a constitutional amendment in 1940 that Canada had national unemployment insurance, something the United States had put in place in 1935. Nor was the almost three-fold expansion of federal spending in the United States during the 1930s, from $3.1 billion in 1928 to $8.8 billion in 1939, matched in Canada, where Ottawa's spending rose by only 70 per cent in the same ten years, from $405 million to $681 million. (...)  
  
          Nevertheless, there was eventually a Canadian New Deal, and it was intended to be radical: announcing it in January 1935, Bennett declared that it marked « the end of laissez-faire » (quoted in Morton 1994: 205). He wasn't the only politician with a say, however. In 1935, as we have seen, W.L. Mackenzie King, who returned to the prime ministership in October of that year, still believed in orthodox economics. In his initial reaction, he could not decide whether the Bennett New Deal was « Hitlerism, Fascism or Communism » (quoted in Thomson and Randall 1994: 135). Louis-Alexandre Taschereau, the Liberal premier of Quebec, was more precise, identifying it as « a Socialistic venture bordering on Communism » (quoted in D. Morton 1994: 207). This initial reaction persisted. (...)  
  
          The historians Thompson and Randall (1994) summarize Canadian experience in the 1930s as follows: « In 1933, the United States and Canada lagged far behind western Europe in government acceptance of responsibility for individual citizens; by 1940, the United States had begun to catch up ... At the end of the 1930s, the United States was the more advanced welfare state, Canada the backward northern neighbour » (134, 140). In this they echo Bruce Hutchison, who wrote in 1943: « Beside pre-war Canada Britain was almost socialistic, and the New Deal of the United States was wild radicalism ... We are still a very conservative nation by the definitions of these times perhaps the most conservative nation under the democratic system in the world » (90). (p. 114-116)
From the Great Society to the Just Society 
  
          Canada has a very extensive set of social programmes. Public health care, government-run pension plans, social welfare, unemployment insurance, etc., these are all the things that distinguish us from the Americans, where such services are private and those who can't afford them are simply left on the side. Wrong!! These programs were first thought out by American (and German and British) socialists, and were imported here rather late. Pearson's reforms and Trudeau's so-called  « Just Society » scheme to expand social programs at the end of the 1960s simply copied, a few years later, Kennedy's and Johnson's « Great Society » plan. 
          (...) The reformist character of Lester Pearson's government was also shaped at least partly by events in the United States. Tom Kent editor of the Winnipeg Free Press, co-drafter of the Liberals' 1958 election platform, and later Pearson's chief policy adviser and principal secretary, a man once accused by C.D. Howe, perhaps accurately, of wanting to import Fabian socialism into Canada argues that in fact « there was nothing remarkable about ... [Pearson's] policies. They embodied Canadian versions of the ideas that were in the air of a world where, for instance, [John Kenneth] Galbraith was just finishing the writing of The Affluent Society (it was published that summer) and Kennedy was preparing the presidential campaign that, in its expression of a new, forward-looking spirit, struck responses in many parts of the world besides North America » (Kent 1988: 56). English (1992) puts the matter even more starkly: « Canada's liberals looked southward again for the breath of new life ... In one of those fundamental shifts in American history between reform and retreat that Arthur Schlesinger, Jr., Kennedy's friend and biographer, has argued are the salient feature of American history, the liberal hour had once again struck, and the sound reverberated in Ottawa as loudly as in Washington. » (238).  
  
          The hour may actually have sounded more profoundly in Washington. There was a Great Society, after all, before there was a Just Society. U.S. spending on social programs went from $77.2 billion in 1965 to $146 billion just five years later (Bénéton 1985: 76). (...) « For the first time in American history, writes the English historian J.R. Pole, equality became a major objective of government policy; and also for the first time ... governments not only made laws but constituted themselves instruments of egalitarian policy. » (Pole 1978: 326).  
  
          (...) With the customary lag of a half-decade or so, programs such as pay and employment equity now have made their way to Canada, where the backlash against them by even such a moderate observer as journalist Richard Gwyn suggests they may also be at odds with traditional Canadian values, which in this case sound suspiciously American: « Aside from being an American import, the "equality of results" doctrine that underpins employment equity programs ... has always run counter to the Canadian grain. » (Gwyn 1995: 180).  
  
          Perhaps in the end Pearson and Trudeau did lead Canada further down the « progressive » path than Kennedy and Johnson were able to take the United States. The two countries' public expenditure figures displayed in chapter 5 certainly suggest as much. But the examples just cited put paid to the notion that the United States, in its practice as opposed to its preaching, has always been more dedicated to laissez-faire than Canada. In fact, on many important occasions in our history, we have copied their interventions whole cloth. (p. 118-120)
          So, what should we conclude of all this? Answer: that the real interventionists and socialists at heart are the Americans, and that the real Canadian tradition is one of rugged individualism being slowly frittered away under the overwhelming influence of American collectivism. As Scott Reid also explains in this special issue (see LA TRADITION INDIVIDUALISTE CANADIENNE, p. 15), this is exactly the inverse of what we are told to believe.  
  
          The anti-Americans among us have a point: we should protect ourselves from the nasty winds coming from the south. But they are wrong about the rest. The Canadian identity that should be cherished and the Canadian tradition that should be upheld are based on individualism, small government and the free market. That's what we were until the 1950s. The new identity and tradition invented since are phony ones, and we should let the Americans have them.  
 
 
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