The current evolution in Canadian federalism is pro- found, unstoppable, and a joy to behold. The net result will be a heightened respect for the concepts of subsidiarity and diversity. This in turn will strengthen the federation.

Bold words? Indeed. And more: for some observers, centralists, the very idea that subsidiarity and diversity (which on balance in the Canadian context imply net decentralization, different approach- es and different outcomes in different parts of the country) could strengthen unity is an unfathomable concept. They will find the coming years trying.

First let it be said that there is a per- vasive worldwide force bearing upon this topic. Globalization and technology are empowering actors both larger and smaller than the traditional national state and at the same time threatening traditional ways of life. In the market sec- tor, this leads to less and less dependence upon or attention paid to governments. In the political sector, the result is an appetite for smaller governments closer to home, such governments being both more comprehensible and accountable.

With that background and within Canada, there are two complementary forces at work in the two sovereign orders of government. At the federal level there is a gradual realization that confrontational approaches, or even the classic divide-and-rule approach to the provinces, are not approved by the voters. It would be a great understate- ment to say that this realization is unwelcome to the federal bureaucracy, but that does not make it go away.

And most importantly, in Paul Martin we appear to have a new prime minister who is prepared to take the more conciliatory (and successful) approach of Lester Pearson, rather than the confronta- tional Trudeau/Chrétien path.

At the provincial level one sees the mirror image " a realization of the power of the provinces if they act in unison. This is a natural outgrowth of the Council of the Federation, a body initially dismissed as unimportant by most. Through this machinery the provinces are gradually developing an institutional memory and a provincial vision of the federation. The process is slow and there will be setbacks. But the Council will also build upon successes.

The September health accord must be ranked as just such a success. When all the fine words are stripped away, the deal gave the provinces more money to run their health care systems pretty much any way they want, and gave the central government the right to collect data.

Too stark a view? Surely provinces have promised to do this and that " wait lists, home care, and so on? Such promises cost nothing to make. The provinces were going to spend money in these areas anyway. Nothing more than the old shell game is required " what used to be provincial money for such and such a program is now federal and presto, the categories are satisfied. The provinces gave up zero in jurisdiction.

But in gaining the right to meas- ure outcomes, the feds have gained a great deal for Canada. At the Fraser Institute we have a large carved plaque on the meeting room wall " ”œIf it matters, measure it.”
Health is only one jurisdiction.

There are many other areas where Ottawa would like to be relevant, but comes up against the inconvenient fact that the Constitution has assigned mat- ters of interest to most ordinary people to the provinces. The important measures in the last Throne Speech " education and cities, for example " encroached upon provincial powers. The all-purpose invasive technique of the central govern- ment in dealing with the nuisance of Section 92 has been the spending power. Will we see the use of this tool decline?

The courts might have some views. In a landmark judgement this year the Quebec Court of Appeal found uncon- stitutional the attempted use of the EI fund for policy matters far removed from actual employment insurance. This could be important, but it would be unwise of the provinces to put much hope in the eventual rulings of a Supreme Court appointed unilaterally by the central government.

This, of course, must be changed.

Imagine a labour-management sit- uation where every arbitration panel was appointed solely by one side! Watch for a draft constitutional amendment in this area.

In the meantime, the better provin- cial technique vis-à-vis the spending power is raw political muscle. No con- ditional grant program from Ottawa could survive a united refusal by the provinces to implement it, or even a united front by the four large provinces.

Will we approach the federal state nirvana, wherein jurisdictions raise more or less the same amount of money as they spend? That would require a signif- icant move beyond the health accord pattern, to an actual shift of tax points " not just to the provinces, but from the provinces to the cities. (The provinces will have to be involved in any city fiscal planning. Federal largesse will simply be offset by reduced provincial contribu- tions to cities until such a deal is done.)

There is little sign of this yet, but the principle should be firmly estab- lished as one of the cardinal objectives of the Council of the Federation.

An imaginative re-jigging of equal- ization will be required to make all of the above work " but that is for another day.