Dividing Canada around old and new fault lines is no way to fight a recession, or build a country

by Jim Meek

It’s tough to find this thing, progress, while we’re being driven south inside a wintry recession equipped with all-season tires. Yes, you get the feeling that this downturn has traction and staying power. And the road ahead seemed all the more perilous after Bank of Canada Governor Mark Carney showed up in Halifax on Jan. 27. That was the day federal Finance Minister Jim Flaherty tabled his budget in the House of Commons. Carney delivered the same message as Flaherty—namely, that Canada will fare relatively well through the slump, with growth rebounding in 2010.

The bank boss did add a caveat in a Feb. 10 appearance before a Parliamentary committee, saying Canada’s recovery would depend on an American resurgence. Still, Carney’s forecasts reflected an optimism shared by no one outside the federal Finance Department and the Bank of Canada. I was left with the uncomfortable feeling that the governor—who is supposed to be, above all, an independent chap—was helping deliver Flaherty’s message to the deeply worried people of Canada.

To be charitable, I will add that Carney may have been an unwitting ally in this information war, but I still ask why the man would deliver a major economic speech on the day his minister of finance delivered a budget. And what a budget it was. I revisited the details two weeks after the fact and couldn’t avoid the unhappy conclusion that the Harper government is trying to buy Ontario’s support in the next federal election. Quebec, a nation with a soul, couldn’t be purchased in the last vote, even in the wake of a reshaping of the equalization formula that poured an additional $700 million into
la belle province in 2007.

Now it’s Ontario’s turn. I don’t quibble with the fact that Ontario now qualifies for equalization for the first time. But I wish the Harper brain trust could explain why the Canada Health Transfer was adjusted in a way that pours $900 million into the province in the fiscal year starting April 1. Then there is southern Ontario’s new development agency. It took a century of hardship for the Atlantic provinces to get the region’s own regional development agency. It took a single, severe, cyclical downturn in the manufacturing sector for southern Ontario to get the same benefit, along with $1 billion in funding. In short, regional development has just gone national, in a big way.

Now, the budget measures wouldn’t be so bad in themselves, except that they seem to be part of a larger trend: Prime Minister Stephen Harper has taken to tinkering with federal cash transfers in a way that rewards friends and punishes enemies. This year he is cultivating the financial gardens of his putative supporters in Ontario with more than a billion bucks. In Quebec, the voters who abandoned his party in 2008 will have to live with almost a billion dollars less than expected in equalization payments.

Newfoundlanders and Labradorians take an even bigger hit on a per capita basis. This came at a time when the unemployment rate on the Rock was almost double that of Ontario. Characteristically, bureaucrats at the Department of Finance refused to detail the equalization changes that promoted Ontario while punishing Newfoundland Premier Danny Williams. And I could only conclude that, like the Wizard in Oz, the feds were standing behind a curtain pulling levers that seemed to create fire and amplify the voice of God.

Premier Williams, who ran an ABC (Anyone but Conservative) campaign against Harper in the 2008 election, fired back at His Lordship. And when I started to listen to the words of his roaring, and ignored the roaring of his words, I found myself siding with Danny. He argues that Harper uses national institutions like equalization to curry political favour according to the political game plan of the moment. It’s no way to treat a country or one of its constitutional pillars, equalization. 

For Harper, though, winning votes in Ontario seems to take precedence over principle, even if it means dividing the nation around old fault lines (the West versus Central Canada) and one new fissure (Newfoundland versus Ottawa). This is no way to build a country, or to fight a recession.

Jim Meek rejoins Progress after an 18-month hiatus. He is a freelance writer and consultant with Bristol and can be reached at jmeek@bristolgroup.ca.