While Canada has long since ceased to be a rural society, only recently have cities emerged as policy centre-stage. On the economic front, ”œglobal city regions” (GCRs) are now recognized as the dynamic motors and drivers of the knowledge economy while, on the political front, cities are intent on being brought more fully and formally onto the operations of Canadian feder- alism. Understanding why this is so is a necessary precursor to framing appropriate policy for urban Canada. An obvious entrée on the political front is the observation that Canada’s cities are constitutionally the creatures of the provinces. Partly as a result, decen- tralization within our federal framework tends to mean the devolution of powers to the provinces, not to the local level. The Economist notes that Canadian cities are in receipt of fewer transfers from upper levels of government than is the case in any other OECD federation. All of this is about to change. Increasing integration is leading to the transfer of many traditional national powers upward to the international arena and at the same time the falling costs of infor- mation and coordination are enabling more activities to be brought ”œcloser to the people” in the spirit of subsidiarity. Hence, urbanites are increasingly desirous and able to exercise more con- trol over how they live and work and play. This is clearly reflected in the cali- bre of the emerging urban leadership and in the associated up-tick of interest in city issues and politics.

The cities’ economic star is also shining more brightly because in an era where knowledge and human capital are at the cutting edge of competitiveness, cities and especially GCRs are nodes of intense concentrations of knowledge, human capital, research and develop- ment which drive domestic and international activity and innovation. Arguably, whether Canada can sustain itself as a high-income economy will come down to how Canada’s GCRs will fare in rela- tion to their US counterparts. With Canada’s well-being riding on the future of our cities, Ottawa has little choice but to become an active player in the urban environment, regardless of the written constitutional word. Phrased differently, nation building in the former resource- based society was typically bound up with mega projects that tended to be rural. In the knowledge era, nation building and indeed what sells electoral- ly are bound up with citizen issues which are inherently urban.

Because much of the jurisdiction over these citizen/nation-building issues rests with the provinces, Ottawa has grasped the enormous significance of this challenge. On the one hand, it has transferred aspects of old nation building (forestry, mining, energy) to the provinces, no doubt in order to make room on its policy plate for new nation building. On the other, Ottawa has begun to shift transfers away from the provinces and toward citizens. While Ottawa is shying away from a repeat of the earlier Urban Affairs fiasco, the Martin government is actively engaged in designing an urban agenda.

While this will surely trigger a feder- al-provincial jurisdictional feud, the cities may well welcome such a result. They already envy US cities that have direct access to Washington’s infrastructure funding. Playing Ottawa off against their provincial capitals may provide cities with what they want and with what they need ”” more powers, more fiscal inde- pendence and more say in how they are affected by policies emanating from the senior levels of government.

While this requisite for dynamic efficiency applies to all cities, CGRs need in addition to be internationally com- petitive as they go head-to-head with US GCRs. This may be a tough sell political- ly. When we were an east-west economy operating behind tariff walls, cities became a convenient place to redistrib- ute from. In NAFTA economic space, our GCRs need to retain and redeploy a larg- er share of the revenues that are generat- ed within their boundaries. Sensitive as this may be, the cities hold the trump card since our collective standard of liv- ing is in the balance.

It might thus appear that the provinces are cornered since cities are ready to invite Ottawa in if the provinces do not address their demands, and Ottawa would probably like nothing better than for Canada to embrace ”œhour-glass feder- alism” with the provinces occupying the shrunken middle. However, the provinces are already responding. In light of Martin’s delaying of his gas-tax shar- ing, Manitoba has already stepped in the breach. And in connection with the recently-inaugurated Council of the Federation, one option is that the provinces would allow the cities some formal role, thereby addressing part of the cities’ intergovernmental agenda.

Finally, there is ample room for cities to flex their muscles within the existing environment. Winnipeg is leading the way here with its intent to restructure its revenues away from property taxes and toward incentive- oriented and benefit taxation. This will be contagious as others follow or similarly innovate. Welcome to the era where Canadian cities will be in creative evolutionary flight.

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