Federalism in Canada During Keynesian and Neoliberal Eras - Essay Example

Federalism in Canada during Keynesian and Neoliberal Eras Rachna Jalan Federalism in Canada during Keynesian and Neoliberal Eras Introduction Canada is a nation of diversities – be it economic, social, geographic or cultural (“Canadian Federalism”, 2007). Federalism in the country has been playing a crucial role in reconciling unity with diversity (Lecture 17, n.d.). It is federalism in Canada which has enabled the country to maintain a balance – which in tangible terms signifies achieving national objectives, taking into account umpteenth number of local and regional considerations at the same time continuously adapting to change (“Canadian Federalism”, 2007). The Canadian federation’s flexibility has been responsible for finding solutions to public policy along with assisting it to rise to the challenges faced (“Canadian Federalism”, 2007). To put it simply, the country’s federation has been a common strength in identifying divergences and overcoming them thereby constructing a stronger nation (“Canadian Federalism”, 2007). The two centers of focus of the Canadian federal experience signify cultural dualism, the desire and ability of French and English speaking Canadians to survive as such along with the use of institutions of the government which they respectively dominate, and the other is public action to satisfy the material aspirations of individuals and groups living within an economy in which burdens and benefits are ascertained by the economic policies of successive federal administrations (Smiley, 1965). Canadian federalism exhibits the trend of decentralization (Lecture 17, n.d.). In spite of facing huge challenges the Canadian federation has made it work towards this trend (Lecture 17, n.d.). Canadian Federalism during the Keynesian and the Neo-liberal Eras Early judicial decisions showed an inclination towards provincial power in Canada after 1867 (Lecture 17, n.d.). The election victory of 1896 marked he reversal of Macdonald’s centralism by Laurier (Lecture 17, n.d.). Both World War I and World War II brought interruptions in the movement (Lecture 17, n.d.). However, it spite of some federal states opting to move more towards centralized over time, Canada has remained persistent in its trend of decentralization of authority (Lecture 17, n.d.). The Rowell-Sirois Commission Due to the influence of Great Depression (1929-1939), the Rowell-Sirois Commission revealed inclination towards economic management and social welfare from provinces to federal level (Lecture 17, n.d.). Reorganization of taxing functions was advised to favor federal assumption of new spending priorities and to enhance redistributive measures to offer national standards from coast to coast (Lecture 17, n.d.). However, the orders of the Rowell-Sirois commission along with the Keynesian case favoring a strong central government to manage the economy were opposed by the decentralization of political power in Canada (Lecture 17, n.d.). The entire experience of the post-World War II with economic management and federal-provincial relations has actually been a struggle to tackle the fundamental discordance between the requirement for unity and the aspiration for regional self-determination (Lecture 17, n.d.). The Green Book Proposals The federal government tabled its proposal for postwar reconstruction in a document which has been widely referred to as the Green Book (Montigny & Lorene, 2003, 2000). Once the proposals were made public each of the provinces were able to ascertain the acceptability of the reconstruction plans and to develop counter-proposals, if needed (Montigny & Lorene, 2003, 2000). The federal government proposals enclosed in the Green Book have been looked upon as having offered the blueprint for the Canadian social security net that had actually developed by the end of the 1960s (Gauvreau & Christie, 2003: 133). The Green Book proposals outlined a plan for the continued authority of the central government to take charge of the corporate, income, and a succession tax fields in return for introducing social policies and a system of equalization grants (Montigny & Lorene, 2003, 2000). This clearly reflected a marked centralization of authority and taxing abilities in the hands of the federal government complemented by an equal reduction in the fiscal and administrative authorities of the provinces (Montigny & Lorene, 2003, 2000). The Green Book proposals was predicated on the continuation of the wartime policy by which Ottawa was supposed to gather both direct and indirect taxes and returned to the provinces a premium as a compensation for this incursion of provincial jurisdiction (Gauvreau & Christie, 2003: 138). This additional revenue enabled the federal government to assure the provision of a social security package that encompassed unemployment insurance, disability allowances, pensions, and a joint federal-provincial health insurance system (Gauvreau & Christie, 2003: 138). It was expected that in case of acceptance the policies would be the device of entirely shifting the weight of administration and legislation on social problems from the provinces to the dominion (Gauvreau & Christie, 2003: 138). Further, the Green Book guaranteed a system of equalization grants to support those provinces which revealed to have a standard of living below the national average (Gauvreau & Christie, 2003: 138). The failure to attain an agreement with all provinces on tax-sharing was recognized by Finance Minister Ilsley’s budget of June 1946 which brought up the chances that individual provinces could acquire the federal offer of vacating the personal, corporate, and succession taxes in exchange of a lump-sum “rental” payment (Gauvreau & Christie, 2003: 145). Following this the implied “all or nothing” nature of the Green Book proposals bore no more reality along with embarking Canadian public policy on an adventure in “ad-hocracy” or the achievement of change through “informal accommodations” (Gauvreau & Christie, 2003: 145). The Green Book proposals was a federal attempt to restructure peacetime arrangements to reflect recommendations of Rowell-Sirois, successful experience of wartime with centralized direction and control of the economy and the general tone of Keynesian macro-economic concept of the era (Lecture 17, n.d.). However, it was let down by reassertion of provincial claims (Lecture 17, n.d.). Hence, the federal government was unsuccessful in acquiring consent from the provinces at the end of World War II for centralized decision-making essential for national macro-economic management (Lecture 17, n.d.). Nevertheless, the reassertion of provincial rights brought with it the development of provincial economic and social management bureaucracies mainly designed on the interventionist Keynesian model (Lecture 17, n.d.). The provincial planning office established by the socialist governments in Saskatchewan during the 1940s and 1950s can be cited as the best early example, while Quebec became home to a much bigger provincial policy administration in 1960s with the target of amending the agenda of the Quiet Revolution (Lecture 17, n.d.). Co-operative Federalism The federal government faced an ad hoc compromise which encompassed the 1957 official adoption of “equalization” payments (now exemplified in the Constitution), the national infrastructure consisting of St. Lawrence Seaway, Trans-Canada Highway and communications networks, the social programs consisting of family allowances, unemployment insurance, hospital and medical insurance, education, pensions and regional economic development (Lecture 17, n.d.). The quarter century after the War experienced a completely new and complex set of arrangements agreed upon by teams of experts fielded by the federal and 10 provincial governments to tackle the constitutional problem responsible for making the interwar period difficult for policy makers in Canada (Lecture 17, n.d.). In spite of its complicacies the working of the system revealed success (Lecture 17, n.d.). The system resulted into expansion of the economy and the Canadians enjoying unprecedented prosperity, completion of huge public works which were of national importance, bringing into existence the national cultural institutions, huge expansion of the educational system and providing access to education throughout the nation, setting up of a national health care system considered by many as a model which has not been achieved by the U.S. in spite of its persistent efforts, amendment of redistribution of income with the objective of constraining inequalities in spite of objections from both the groups – one according to whom it had been excessive and another as per whom it was inadequate (Lecture 17, n.d.). However, the forces of disunity in the nation grew stronger instead of being weaker (Lecture 17, n.d.). French-Canadian Separatism The post World War II experienced reassertion of provincial powers in a number of ways (Lecture 17, n.d.). However, the most significant affect was seen in Quebec because hare it was compliments with the crumple of the traditional set up authority framework in the province, the materialization of a new francophone intellectual and business elite and the Parti Quebecois with the target of shifting Quebec from the Canadian federation (Lecture 17, n.d.). Western Alienation The historical legacy of the Canadian federation reflected the central Canadian ‘imperialism” encompassing tariff policy, freight rates and resource ownership, the 1970s clash between Alberta and Ottawa pertaining to energy exports encompassing 1980 National Energy Policy and the 1990s divergence between BC and Ottawa encompassing lumber trade and the “salmon war” with the U.S. (Lecture 17, n.d.). The experiences following the World War II boom was entirely enjoyed by the Western Canada reflecting mounting per capita incomes, growing employment opportunities, developments in housing, transportation and communication (Lecture 17, n.d.). Innumerable traditional disadvantages of western life such as the sense of isolation and cultural deficit once allied with region were being conquered (Lecture 17, n.d.). Nevertheless, a growing sense of alienation existed at the same time (Lecture 17, n.d.). Certain reasons might be due to conflicts over resource development projects like the Columbia River in BC in the 1950s, the oil and gas pricing issue in Alberta in the 1970s, fisheries policies in BC in the 1980s and 1990s and differences pertaining to multiculturalism, the accommodation of Quebec in the federal union (Lecture 17, n.d.). Repatriation The Canadian federal government experienced Constitution of Act 1982, entrenchment of equalization payments, amending formula, 7 of 10 provinces with minimum 50% of population and Quebec’s exclusion (Lecture 17, n.d.). A forum was created for enabling the regional and other special interest groups to compete for advantage by way of developing a national debate over constitutional reform (Lecture 17, n.d.). By the beginning of the 1980s the tiresome negotiations going on since the end of the war between the federal government and the provinces for influencing the constitutional reform in the country reached a saturation point (Lecture 17, n.d.). In spite of Quebec’s acceptance, repatriation of the Constitution to Canada was initiated by the Prime Minister, Pierre-Eliot Trudeau (Lecture 17, n.d.). The Constitution Act renamed by the British North America Act became dependent upon the implementation in Canada provided seven of the ten provinces having 50% of the population sanctioned any proposed alterations (Lecture 17, n.d.). Few existing Canadian statutes were preserved in the new Act which encompassed equalization payments by Ottawa to the provinces and the Charter of Rights and Freedoms (Lecture 17, n.d.). The Meech Lake Accord This era represents the defeat of Parti Quebecois in Quebec by the liberals of 1895 (Lecture 17, n.d.). The constitutional negotiation encompassed distinct society, nomination of Senators and Supreme Court judges (Lecture 17, n.d.). The agreement was reached by June 3, 1987 (Lecture 17, n.d.). The federal government’s endeavors in making the repatriated constitution satisfactory to Quebec gave way to the Meech Lake Accord which was signed in April 1987 and was sanctioned by the Quebec National Assembly in June in the same year (Lecture 17, n.d.). The agreement offered for identification of Quebec as a “distinct society” within the Canadian federation, provincial involvement in the appointment of members of the Senate and Supreme Court judges and demanded confirmation be all the provincial legislatures and the Canadian Parliament within a period of 3 years (Lecture 17, n.d.). Meech faced failure due to the suspended authorization of the two provinces Manitoba and New Brunswick along with the withdrawal of the approval of Newfoundland which revealed consent earlier (Lecture 17, n.d.). The Charlottetown Accord Meech’s defeat suddenly led to a solidifying of Quebec’s position, with fresh demands outlined in the Allaire Report adopted by the Quebec Liberal party in 1991 encompassing sole provincial authority over social affairs, culture, health, family policy, manpower policy, communications, the environment, agriculture and public security (Lecture 17, n.d.). In August, 1992, a meeting of federal and provincial ministers followed extensive public hearings (Lecture 17, n.d.). The outcome was a new agreement encompassing majority of the Meech Lake provisions along with new measures so that Quebec’s representation in the federal legislature would be safeguarded (Lecture 17, n.d.). Rent-seeking An economic study of constitutional reform led to winners and losers, elite accommodation, the economics of “nationalism”, “pulling together or pulling apart” (Lecture 17, n.d.).The integration of the Canadian constitution means that any sort of alterations in the Canadian constitution would lead to some winners and some losers (Lecture 17, n.d.). Keynesian Vis-à-vis Neo-Liberal Eras The anticipation that the shift towards a neo-liberal model of the state would undoubtedly result in a more centralized federation or in a heightened federal-provincial conflict was a complete error (Rocher & Smith, 2003). It has been rightly said: The historical experience of Canadian federalism shows that levels of centralization and levels of federal-provincial conflict waxed and waned at different points in the years (1944-79) when the Keynesian model of economic regulation was ascendant in Canada. This implies that factors other than a change in the basic economic role of the state must have accounted for the variations in centralization and conflict that occurred in this period. If that was true of the Keynesian mode of state economic regulation, I might have asked, why should it be different in the era of neo-liberal regulation? (Rocher & Smith, 2003: 227). It has been believed that the shift towards the neo-liberal model has been a gradual one (Rocher & Smith, 2003). Some anticipate that any primary alteration in the mode of state economic regulation promoted by the FCAs would have massive implications for the character and dynamics of Canadian federalism (Rocher & Smith, 2003). On comparing Canadian federalism during the Keynesian era with that during the neo-liberal era revealed basic major characteristics which are believed to be developed in the neo-liberal world economy (Rocher & Smith, 2003). Firstly, the regulation of the Canadian economy at present involves three powerful tiers – the supranational such as the NAFTA arbitration tribunals, the federal and the provincial (Rocher & Smith, 2003). According to GATT and other international treaties such a supranational tier has existed since long (Rocher & Smith, 2003). But the authority and significance of the top tier is greatest today (Rocher & Smith, 2003). This fresh framework modifies the very meaning of centralization which can no longer be conceived as the ebb and flow of regulatory right between only two levels, the federal and the provincial (Rocher & Smith, 2003). Secondly, a significant aspect of the changed character of federalism in Canada is that under the neo-liberal principles stated and implemented by the three-tiered regulatory system at present no government has the same capacity to control the nature of corporations and market forces that were owned by both the federal and the larger provincial governments in Canada under the more closed Keynesian model of regulation (Rocher & Smith, 2003). Moreover, neither of them have the same capacity to redistribute the benefits from economic growth to eradicate the exacerbation of economic inequalities (Rocher & Smith, 2003). While talking about Canadian federalism in neo-liberal period one can consider the federal Conservative party’s notion of “open federalism” from a political economy view (Adam, 2007). It has been argued that open federalism will attract business interests and not unions and social activists due to its consistency with the neoliberal approach to federalism which seeks to lock in free market-oriented policies (Adam, 2007). Moving towards globalization is another significant change in the Canadian federalism of today (Rocher & Smith, 2003). It is no more the two-tiered, largely national system of economic regulation that shaped the first century of Canadian federalism (Rocher & Smith, 2003). The country today is integrated into the world economy in general to such an extent that it would be extremely expensive to disintegrate and move back to that level of national economic self-sufficiency that was present sometimes back (Rocher & Smith, 2003). Hence, for ensuring current or higher levels of international economic regulation it is mandatory to have a supranational system of regulation (Rocher & Smith, 2003). Conclusion From the above discussion we come to a conclusion that the federalism of Canada has always been a subject of interest and exploration throughout all eras. Studying Canadian federalism during the Keynesian and the Neo-liberal eras particularly has been quite interesting. The rejection of the theme of centralization proposed by the Rowell-Sirois Commission and the Green Book in the past has given way for decentralization in the present. The province of Quebec has been sharing a fundamental distrust of the federal government (Montigny & Lorene, 2003, 2000). The emergence of three powerful tiers – the supranational such as the NAFTA arbitration tribunals, the federal and the provincial of today has taken over the two-tiered, largely national system of economic regulation of yesterday. Moreover, the regulation in the Keynesian era revealed a more closed structure when compared to the neo-liberal era. Finally, the new issue of globalization is worth mentioning as the modern change in the Canadian federalism. References Adam, Harmes. (2007). The Political Economy of Open Federalism. Canadian Journal of Political Science. 40 (02): 417-437. “Canadian Federalism: The Way Forward”. (2007). Canada. Retrieved Mar 18, 2008, from http://www.pco-bcp.gc.ca/aia/index.asp?lang=eng&Page=media&Sub=speeches&Doc=20070717_e.htm. Gauvreau, Michael & Christie, Michael. (2003). Beyond the Green Book: The Ontario Approach to Intergovernmental Relations, 1945-1955. Cultures of Citizenship in Post-War Canada, 1940-1955. (p. 133-145). McGill-Queen’s Press. Lecture 17. (n.d.). The Political Economy of Canadian Federalism. Retrieved Mar 18, 2008, from http://www.chass.utoronto.ca/~echist/lec17.htm. Montigny, Edgar-Andre. & Chambers, Anne Lorene. (2000). The Ontario-Quebec Axis: Postwar Strategies. Ontario Since Confederation: A Reader. (p. 386-394). University of Toronto Press. Rocher, Francois. & Smith, Miriam, Catherine. (2003). Public Policy and the Division of Powers. New Trends in Canadian Federalism. (p. 227-228). Bradview Press. Smiley, Donald, V. (1965). The Two Themes of Canadian Federalism. The Canadian Journal of Economics and Political Science. (p. 80-97). Publisher Blackwell Publishing. . Read More