Canada’s Candide

My instructions are to write about western Canada, British Columbia in particular. I contemplate the task on a July afternoon, while looking out the open cottage door and across Tribune Bay. A butterfly comes into view—a fluttering yellow dot moving randomly against the brown and green of hills on the bay’s far side, the silvery blue of sunlit ocean and the purple lavender in the foreground, which turns out to be its destination. Languidly, it takes pollen from one stem, then another.

Like the butterfly, I prefer reaching my destination via digressions. First, a little history.

The Last Best West

Much as wheat summed up western Canada a century ago, oil does today.

At the peak of the wheat boom, in the first decade of the last century, Wilfrid Laurier famously promised that the 20th century belonged to Canada. At the time, European immigrants, from Kiev to Glasgow, were turning the sod of their homestead claims in the “last best West.” The century did not belong to Canada of course, and the wheat boom came to an abrupt end with a decade of drought in the 1930s. This was an environmental disaster compounded by poor farming practices, by a world economic depression and by Ottawa’s high tariff policy designed to protect industrial jobs in the East at the expense of grain exporters in the West.

This century will not belong to Canada any more than did the last: it belongs to China and India. Between them, these rapidly industrializing countries account for 40 percent of humanity. Another 5 percent live in low- to middle-income industrializing economies of the region (Thailand, Malaysia, Vietnam, Cambodia). For two decades, gross domestic product in China has grown at 10 percent annually; in India, and most of the others, at annual rates above 6 percent. However unequal the distribution of benefits and however many have been left behind in misgoverned countries such as Bangladesh and Burma, two billion in Asia are living better than did their parents. Since 1990, the number living on less than $1 per day in the region has declined by almost 300 million.

The major impact on Canada of all this is high energy prices. Asia’s voracious energy demand has led to a tripling of prices this decade. So long as China and India avoid convulsive wars or other traumas and sustain their exponential growth, a barrel of oil will sell for more than $40 per barrel—its current price is over $70—and a western Canadian resource boom of equivalent significance to the wheat boom will continue. At prices above $40, Alberta’s economically viable oil and gas reserves (most in the form of tar sands) are of similar magnitude to those of Saudi Arabia, Iran or Iraq. If concern with global warming results in significant switching from hydrocarbon to nuclear fuels this century, then Saskatchewan’s uranium reserves will allow it to parallel Alberta as a destination for future investment.

A Tale of Two Cities

As the butterfly flits between stems, I speculate on differences between Vancouver, my home town, and Calgary, the heart (and brains) of the western economic boom.

Perched at the mouth of the Fraser River valley, circumscribed by the coastal mountains to the north and the Fraser River to the south, protected by Vancouver Island from Pacific storms but close enough to the ocean to avoid continental weather extremes, Vancouver enjoys one of the world’s most beautiful natural settings. Despite air travel and good roads, it remains distant from the rest of the province—even more so from the rest of Canada.

Vancouver has become a prosperous city-state looking toward the Pacific. A benign climate and physical beauty have drawn footloose service industries, and with them have come immigrants from elsewhere in Canada and from overseas. Nearly 40 percent of Vancouver’s two million residents now have as a mother tongue a language other than English or French. (Chinese and Punjabi rank first and second. At less than 2 percent of the population, francophones rank a distant seventh or eighth.)

By contrast, Calgary sprawls across the surrounding prairie, unconstrained by geography. It compensates for a lack of physical charm with business and political ambition. As in Vancouver, the prospect of work at good wages draws immigrants from other provinces. But relative to Vancouver, it has many fewer immigrants from abroad.

Among Stephen Harper’s closest advisors during the last decade has been Tom Flanagan, academic at the University of Calgary. Shortly after Harper came to power, Flanagan wrote for Inroads (a modest competitor to the LRC that I co-edit) an article entitled “Ottawa Is Worth a Mass.” One difference between the two cities is that no political operative in Vancouver would get Flanagan’s allusion to Henri de Navarre, the Huguenot who converted to Catholicism (“Paris vaut bien une messe”) to gain the French throne. In his article, Flanagan summarized the history of Alberta-led incursions on the national political scene: from Preston Manning’s populist crusade against fiscal profligacy to Harper’s strategic insistence on a disciplined political party capable of integrating prairie populists, Quebec nationalists and Harris-era Ontario conservatives. Wistfully, he described the loss of ideological purity entailed in making the transition from movement to governing party (“I miss the exhilaration of [Reform in its early days] that expressed my own views with clarity, of being able to gore all the sacred cows of Canadian politics.”)

Vancouver has plenty of ideologues for whom goring sacred left-leaning cows is done with as much gusto as displayed by early Reformers. The Fraser Institute, our leading local think tank, has never to my knowledge had a kind word to say about a government spending program. What Vancouver has and Calgary does not have is an equivalent herd of left-leaning ideologues who gore right-leaning cows. For example, the British Columbia Teachers Federation, unofficial leaders of the opposition to whoever happens to be running the provincial government, is a repository of old left verities. Whether the Liberals or NDP are in office, it never tires of demanding that government increase taxes on the rich and spend more—on teachers in particular.

Harper’s Conservatives overwhelmingly dominate the western Canadian electoral map—including the interior of B.C. But in Vancouver, as in the core ridings of Toronto and Montreal, the Conservatives failed to elect a single member of Parliament. That says something important about the politics of multicultural urban Canada and the uneasy relationship with political trends in the “hinterland.”

Whatever the Conservatives’ current standing in the polls—slightly above, equal to or slightly below the Liberals—Calgary elites have engaged with Canadian politics in a way that Manitoba elites (the Progressives) did in the 1920s when Winnipeg was unofficial capital of the West. They are making decisions that affect the entire country. Unlike the Progressives, quickly co-opted by Mackenzie King, Harper’s Conservatives have—to date—displayed the political discipline to run a government.

It is hard to imagine a group of Vancouver elites assembling a comparable coalition, of whatever ideological persuasion, which would persevere to form a national government. Vancouver—Canada’s third most populous city—has never produced a prime minister. The brief fin de regime interludes of John Turner and Kim Campbell do not count.

Like city-states around the Pacific, Vancouver has devoted itself to other things. For example, local elites have grown skilled at managing relations among immigrant communities. Singapore’s elites manage potential conflicts among Chinese, Malays, Indians and the residue of European colonialists. Vancouver elites do something similar among Chinese, Punjabi, Vietnamese, Koreans and earlier migrants from the prairies. Most of the time, this exercise in multicultural accommodation succeeds remarkably well. But not always. Prior to the attacks on the World Trade Center, the world’s worst act of air terrorism was Vancouver Sikhs blowing up an Air India plane (and very nearly a second) as revenge for Indian attacks on the Golden Temple in Amritsar.

In Singapore, Hong Kong and Vancouver, the political ethos is to forget historical slights and enjoy the lifestyle that a prosperous community affords. In each, local elites are close observers of the emerging industrial giants of Asia but have few expectations of influencing events beyond their city-state borders. The price Vancouver has paid for becoming a prosperous multicultural city-state is to forgo national ambitions.

Two Cracks in the Foundation

Another digression, on cracks in the foundation.

Relative to most countries of the world, Canadian political problems are trivial. We have, however, two cracks in the country’s foundation. They require ongoing attention if the political edifice is to remain intact. The first is the linguistic/cultural divide between English-speaking Canadians and francophone Quebecers; the second is the large, politically destabilizing regional differences in resource endowments.

Over the last half century, the crack that ominously opened was the first. When Quebecers abandoned the parish during the Quiet Revolution and allophone immigrants reached Montreal in large numbers, the survival of French as Quebec’s lingua franca was imperiled. René Lévesque and Camille Laurin performed a great—if unintended—service for Canadian unity by enacting Bill 101. It embodies a good compromise on a contentious subject, protecting French while affording reasonable minority-language services to English speakers. Pierre Trudeau proposed an idealistic but hopelessly naive alternative: that Canadians become so fluently bilingual in French and English that Quebecers feel no need to protect French in “their” province. He performed a great—again unintended—disservice to Canadian unity by demonizing Bill 101. Harper’s entourage took a long time before understanding all this. But finally they have, and francophone Quebec is tentatively willing to accept the westerners as governors of the country.

I am puzzled as to why western Canadian politicians have such difficulty in understanding what, if one walks along rue Ste. Catherine, is obvious. The answer, I suppose, is the absence of francophones in the West. Very few of us have ever visited the site of Riel’s last battle at Batoche, or the small museum in St. Boniface that documents the failure of “English” Protestant Canada to accommodate Catholic French-speaking Métis who hoped to create of Manitoba a political niche in the new Dominion. To the extent western politicians think about this first crack—which is not much—most privately believe that Riel, Trudeau and Lévesque were, each in his own quixotic way, resisting the inevitable: assimilation to English. Quebecers, they assume, will sooner or later speak English—as do the great grandchildren of homesteaders from Ukraine and the children of more recent immigrants from Punjab and China.

And what of the second crack?

The lowest common denominator of what the West wants is that the current economic boom enable political power and influence to move westward, that Calgary, Edmonton and Vancouver become the equals of Montreal, Toronto and Ottawa—as American cities from Houston to San Francisco now challenge those on the Atlantic coast. These expectations are opening the second crack in Canada’s foundation.

For a moment, let me be optimistic. The equalization fiasco created by Paul Martin and Danny Williams opened the second crack a little, but collectively Alberta political elites have displayed enough diplomatic sophistication over the last year to restore equalization as a credible program. They deserve more credit for this than they have received.

Equalization is a program that only an economist can truly love. It requires federal finance officials to measure how much a province could raise if it imposed the average provincial tax rates on all tax fields at its disposal. Having calculated this hypothetical provincial fiscal capacity, the program provides “have not” provinces, those with per capita fiscal capacity below a specified benchmark, a grant sufficient to bring them up to the benchmark.

For 40 years, equalization has worked remarkably well. It has been key to reconciling Canada’s 19th-century federal constitution—which awards the provinces primary jurisdiction over health, welfare and education—with Canadians’ 20th-century expectations of reasonably comparable services across the country. Thanks to equalization, most of the tough decisions over design and management of social programs remain at the provincial level. Without it, Ottawa would be far more intimately involved in the management of these programs. From the perspective of most of us in the West, that would mean worse decisions.

The rules governing equalization are thrashed out once every five years. Between these marathon debates, equalization transfers are intended to be free from political bargaining. However, in the closely fought 2004 election campaign, Danny Williams saw an occasion to score. He wanted a special deal to sustain his equalization payments, despite Newfoundland’s oil boom. In desperate need of votes, Martin capitulated.

Distressed at the prospect of equalization unravelling via multiple ad hoc deals, the federal Finance Department commissioned Al O’Brien, ex-deputy provincial treasurer of Alberta, to rethink the program, given the complications caused by the tripling of oil prices. O’Brien tabled his report in summer 2006. On the matter of resource revenues, he recommended 50 percent inclusion in the equalization formula (“a fine Canadian compromise,” to quote the title of a colleague’s book on the subject). To their credit, Harper and his colleagues recanted their previous position that oil revenues not enter into equalization calculations, and devoted much of the 2007 budget to implementing O’Brien’s recommendations. They resisted the “firewall” Albertans who wanted no sharing of resource wealth with “have nots” via equalization; they resisted the demands, led by Newfoundland and Saskatchewan, on behalf of Martin’s tradition of ad hoc special arrangements. They resisted Ontario’s curmudgeonly stance that equalization did not need fixing. British Columbia fell in line and supported O’Brien, despite having a few grievances of its own.

Climate Change: Harper’s Chance for a Legacy

Repairing equalization required diplomacy. But the political issue that may well define Harper’s regime is climate change. Addressing this issue will generate regional stresses far more contentious than equalization. Which presumably explains why the Liberals did so little on the dossier when they had the chance.

The Liberals assumed the moral high ground by signing the Kyoto accord in the 1990s. They did little thereafter to persuade Canadians to undertake any of the painful measures required. Proof of failure is that Canadian emissions increased more rapidly over the decade since signing of the protocol than did the Americans’.

The fundamental problem here is that to cut greenhouse gas emissions, the cost of emitting carbon into the atmosphere must rise dramatically. Anything short of that is a placebo. Moral exhortations (Rick Mercer telling each of us to reduce our emissions by one tonne) will not work. David Suzuki’s issuing dire warnings about endangered species will not work. Subsidies to buy hybrid cars and forgo SUVs will not work. What may work is some combination of the following: an overhaul of the tax system to introduce large carbon taxes, tough caps on aggregate carbon emissions by major emitters combined with a market in emission permits, tough regulations on building conservation standards, ambitious renewable energy portfolio standards for utilities, perhaps carbon sequestration and a turn to nuclear power.

Rather obviously, these reforms would impose large stresses on the second crack in the country’s foundations. Carbon taxes potentially redirect a great deal of oil revenue to Ottawa, and emission caps potentially throttle growth of Alberta’s oil-based economy.

Will Harper’s Conservatives do any more than the Liberals? For many years, most Conservative/Alliance/Reform elites subscribed to the National Post thesis that human-made climate change is a left-wing, anti-capitalist delusion. The 2007 federal budget responded to the spike in public concern with a battery of ad hoc proposals that, like those of their Liberal predecessors, imply Ottawa has yet to get serious on this file.

But …

It is unfair to paint all western Canadians as if they are in thrall to tar sands development. Some are; some are not. Peter Lougheed, Alberta’s leading elder statesman, has predicted a major constitutional battle between Alberta, defending its jurisdiction over resources, and Ottawa, defending its trade and commerce power or, more simply, its right to intervene based on “peace, order and good government.” Lougheed himself has argued for more ambitious environmental legislation and slower tar sands development.

As his turnaround on equalization—and recognition of the Quebec “nation”—shows, Harper is willing to shift abruptly on significant issues if convinced of the policy and the political logic. If Canadians continue to tell pollsters and politicians that this is their dominant concern, Harper may well respond with a seriousness the Liberals did not muster. If he does, he would profit from the Nixon-to-China syndrome: as a Conservative from Alberta, he would largely escape the mistrust among westerners that such intervention is a pretext for redirecting jobs and wealth from west to east.

And he would get support from unexpected quarters. It is unfair to describe Vancouver as no more than a city-state looking toward the Pacific. It is also the northernmost outpost of West Coast California culture. Those not commuting to Calgary or not visiting family back in Hong Kong or the Punjab are lounging in a coffee shop. Nowhere in North America is the matter of climate change taken more seriously than in West Coast coffee shops.

California governor Arnold Schwarzenegger recently visited B.C. premier Gordon Campbell. The two hit it off. Both are centre-right politicians; both are sensitive to the spirit of the times. In their joint meeting, they praised green business initiatives and promoted hydrogen fuel cell technology. They endorsed, in principle, emissions trading. No one suspects the Republican governor of California of being obsessed with the survival of spotted owls or of wanting to abandon his Hummers for a bicycle. Precisely because of his Republican credentials, his arguing the case for aggressive innovation on climate change has proved effective. In a parallel exercise, Campbell would be an effective ally if Harper decides to act.

***

The West Coast is magnificent to behold this July afternoon. The butterfly, still flitting over the lavender, can thank my mother for its nourishment. She planted the lavender many years ago, and it is here, on Hornby Island adjacent to the lavender, that my brothers and I buried her ashes several years ago. There is room in the West for both Henri de Navarre and Voltaire’s Candide, content de cultiver son jardin.