Montreal, November 24, 2001  /  No 93  
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Harry Valentine is a free-marketeer living in Eastern Ontario. He can be reached at
by Harry Valentine
          Throughout political history, governments have tried to achieve Utopia and end up creating Hell instead. After World War 1, the American government thought it could achieve perpetual prosperity by taking the banks off the gold standard, then institute a policy of easy credit instead. Various economists like Murray Rothbard and Henry Hazlitt were able to show how the policy started a chain of events that led to the stock market crash of 1929. In Canada, we have had various governments institute policies which were initially meritorious, but then unravelled to reveal the emperor's derrière.
Sowing the seeds of secession 
          During the 1950's and into the 1960's, political luminaries like René Lévesque and Jacques Parizeau were firmly pro-federalist. Yet within the pro-federalist camp, the seeds of the Quebec independence movement were sown. Long ago, something about Canadian federalism was inspiring an independence sentiment in Quebec. More recently, the independence sentiment made an appearance in Alberta. A portion of the population in both Eastern and Western Canada wants freedom from the paternalism which originates from Ottawa. Officials in the Federal government in Ottawa may have believed that they are promoting Canadian unity, but they are unaware that they are achieving its opposite. At the same time, officials in Quebec who wish to separate the province from Canada may also be achieving the opposite of what they intend and perhaps without even realising it. 
          The traditional ally of the Quebec Independence movement was Quebec's Labour movement. Yet the labour movement rank and file may not support the political aims of the union leadership, unless something happens from the outside to unite them. Ottawa's industrial grant policies of the 1970's may have directly affected unionised workers in Quebec. Under Ottawa's policy, a company would be given grant money if they opened up in certain designated economically-challenged areas, such as those which existed in the Maritime provinces and even in Eastern Ontario. A company having labour problems in Quebec could open in one of the economically-challenged areas outside Quebec and be entitled to federal grant funding. After Quebec labour union members lost their jobs when their employer had moved out of the province, they had a reason to hate Ottawa and even blame their job loss on a federalist system. 
          The grant fiasco went on for several years. After a company had been in any one location for two years, the federal grant funding ran out. When the company relocated to another economically disadvantaged area, they got more funding. The federal industrial grant program not only alienated (union) workers in Quebec, the policy also demoralised workers outside of Quebec. These workers found themselves on a roller coaster, only having jobs for about 2-years before the company left again. The industrial grant policy was also breeding discontent in the more prosperous regions of Canada, because of the high rates of direct and indirect taxation paid by the wealth creation sector. In Alberta, the National Energy Policy became a point of contention because Albertans saw their money being taken out of their province and being squandered elsewhere, all in the name of national unity and federalism. 
Now you see it, now you don't 
          The French economic writer Frédéric Bastiat wrote a commentary about what is seen and what is not seen. He stated that a good economist will look at both sides, while a bad economist will only focus on what is seen. What has not been seen is the level of indirect and hidden taxation the wealth creation sector pays in taxes; the profitable banks pay between 53% and 57% tax through hidden and indirect means. A tax on business is invariably an indirect tax on the productive efforts of private citizens... businesses have no other means of ultimately raising funds but from the citizens themselves, by providing a variety of competitive goods and services. What is not seen is that whenever any level of government offers grant money or interest free loans to politically favoured businesses, the funding was taken out of the competitiveness of other businesses elsewhere in the country. But people who work for the heavily taxed, non-subsidized companies do see the effects of government masquerading as a partner to certain politically-favoured businesses located elsewhere. They see the layoffs, they see the cutbacks, then politicians and the news media are shocked when an anti-Quebec sentiment emerges in various parts of the country. One example of this was the incident in which the television news media caught people wiping their feet on the Fleur-de-lys, in a town one-hour from the Ottawa Parliament buildings. 
     « A former Canadian federalist turned Quebec separatist described the political situation of two levels of government trying to do essentially the same thing in Quebec as two chefs cooking in the same kitchen and both preparing the same pot of consommé. »
          The federal policy may have intended, in the mind of government advisers, to promote some form of unity. Instead, the policy caused the opposite, which includes a strong independence sentiment inside Quebec, an independence movement which has started in Alberta and an anti-Quebec sentiment in parts of Canada. Federal industrial grant policy caused unionised Quebec workers to lose jobs in the Montreal area during the 1970's and into the 1980's. Yet federal officials may still not quite understand why unionised Quebec workers are strongly pro-independence... they only have to look to themselves and their federal government's own policies for the answer. 
          Now the federal government has made some policy changes; the federal industrial grant program has been cancelled, yet there is still the policy of interest-free loans and federal subsidies given to the customers of politically favoured companies, even in violation of WTO rulings. What is not seen is that the subsidies given to the customers is being paid for by someone else, who is somewhere else in Canada, except they may not be providing the payment voluntarily. During the summer of 2001, the Prime Minister made reference to Alberta's recovering oil industry and in a speech, he announced (before a hissing crowd) that the people of Alberta would be willing to share their wealth and good fortune with the rest of Canada. 
Flawed Keynesian economic policies 
          The federal plan of equalization of payments has its opponents as well as its supporters. The former group wants the program scrapped while the latter group stands ready to defend the program they regard to be the cornerstone of Canadian federal unity. This program has its critics across Canada, including in the National Assembly at Quebec City and including in Alberta, especially by the pro-independence forces who are most vocal as to the programs flaws. It is as if Ottawa's own policy, which federal officials believe would unite the nation, is achieving the exact opposite of what was originally intended. 
          A former Canadian federalist turned Quebec separatist described the political situation of two levels of government trying to do essentially the same thing in Quebec as two chefs cooking in the same kitchen and both preparing the same pot of consommé. The Canadian federal government could do much to undermine the sovereignty movement in Quebec, by shutting down a few federal agencies, such as the CRTC and several other regulatory tribunals, thereby ending the regime of economic regulation. By letting the unfettered free market forces prevail in areas such as radio and television, air and water transport as well as in the fishing and agricultural areas, that is, put the power of choice directly in the hands of the population at large and out of the hands of bureaucrats and political cronies, a different political atmosphere would prevail amongst the population at large. Ottawa is unwilling to give up such powers, even though doing so is merely a transfer of decision making power directly to the citizens themselves, en masse. 
          Ottawa is insistent on maintaining economic regulatory power when none is needed and in so doing, indirectly sustains an independence sentiment in the minds of a sector of the populations of Quebec and Alberta. That the theories of Lord John Maynard Keynes have by and large been debunked by credible economists like Hayek, Friedman, Rothbard, Hazlitt and Mises seems irrelevant to the senior officials in Ottawa, despite application of those theories at the federal level being the source of a great deal of the resentment against Ottawa. This resentment has been expressed in Canada's western provinces, especially Alberta, and in the east it may actually be the main raison d'être behind Quebec's separatist sentiment. Ottawa is unlikely to admit that Keynesian economic policies are flawed. Neither would top federal officials even want to conceive of how many of Ottawa's own economic policies may be the fuel which drives Quebec's independence movement. After all, no fewer than three of Quebec's former PQ premiers were former federalists. 
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