The strength of the Canadian economy increasingly depends on policies that are traditionally classified as social. In an interdependent world of ever-advancing technology, a country’s primary economic resource is the abilities of its people. Policies for their health and education are greatly more effective if they operate well in childhood and youth. Canada’s do not. The weakest part of our health system is the preventive service that is especially valuable when given early; and we lag behind most advanced coun- tries in our provision for early childhood care and education.
The priority shift needed in our public policy, social and economic, is to youthful well-being. It’s not over-dramatiza- tion to propose, as a contemporary focus, a children’s char- ter: a statement of the civic obligation of Canada’s adults to Canada’s youth. I hope to show how that obligation can best be discharged. To do so, I need to remind you of a little history and to offer some diagnosis.
The deficiency of present policy does not reflect public opinion. On the contrary, concern to do right by our chil- dren is as strong a motivation, among Canadians of all per- suasions, as in any country. Our trouble is that the public will gets lost in the labyrinth that politicians can make of our federalism.
Canada’s federalism began purposefully enough. The driving motive, in 1867 and into the early twentieth centu- ry, was to build a national economy from sea to sea. All the necessary powers ”” tariffs, transportation, immigration and much else ”” were assigned to federal jurisdiction. There was no such precision about what we now think of as social pol- icy. It was hardly government business at all. Schools and hospitals, pensions and health care, became provincial responsibilities because in 1867 they belonged with ”œGenerally all Matters of a merely local or private Nature in the Province.”
The reason why we have in Canada such firmly distinct boxes for economic and social policies reflects the politics of 1867 rather than policy analysis today. It’s more because they were assigned to different jurisdictions than because they’re inherently different either in purpose or in method. In these times they’re not separate but tightly interwoven. We’ve already made considerable political adjustments to the fact. We will make more.
The biggest change came sixty years ago and little needs to be said about it here. The depression of the 1930s and the war of the 1940s bred the welfare state. The Mackenzie King government tried to give it as quick a birth in Canada as in Europe. In 1945 Ottawa offered in effect to combine the operation of social security with its management of the economy, provided the provinces gave up much of their taxing power. The deal was refused. It took twenty years for pan-Canadian public opinion to evolve to the point at which the Pearson government was able in effect to bring about, by more devious means, pretty much the kind of wel- fare state that the King government had sought in vain.
I emphasize that the evolution of opinion was pan-Canadian. English Canada recognizes too little that the measures which transformed our whole society in the 1960s would not have been possible without the Quiet Revolution and the outstanding Lesage government.
However, all that is far behind us. The transformed Canada worked well for enough years to bring complacen- cy. The flaw in the arrangements took time to develop. As you well know, three of the principal programs were created by the federal promise to reim- burse half of provincial costs. For that Ottawa got credit at the start. Once the programs were well established, how- ever, a fixed federal share of the money became a non-event in the media and the public mind. A new set of federal politicians grew riled by having to raise revenue so that provinces could get the credit for delivering popular programs. That is a principal explana- tion of why, for 20 years from 1975, federal governments of both political stripes were so unusually allergic to taxing as much as they spent ”” which of course had to get ever bigger in order to provide the interest on previ- ous borrowing.
When the inevitable turning point came, it was not just a slashing of expenditures, on transfers to the provinces in particular. Ottawa seized the opportunity to revoke, uni- laterally, all commitments to a fixed share of provincial costs. Our welfare state is now frayed because 10 years ago, in the 1995 budget, the coopera- tive federalism that built it was brusquely shattered.
It can be repaired, if the delay is not much longer and ”” an even bigger if ”” our federalism can digest a second major change, just as significant as the arrival of the welfare state. That is, of course, the interdependence of nations in the technological age of instant information: in current short-hand, globalization. In a world where some three trillion dollars a day move through the international monetary exchanges, the economic policies of national governments ”” fiscal, mone- tary, trade; regulations, business subsi- dies, labour codes; all the rest ”” have diminishing force. Even in big economies, politicians can do less than they used to claim, and sometimes deliver, for the jobs and incomes of their constituents. The limitation is particularly sharp for a relatively small economy so closely interconnected with its giant neighbour.
Enthusiasts for the ”œMarket-uÌˆber- Alles” therefore wishfully predict that government will wither into impo- tence. It won’t. It will become more international. The nature of markets is that they work by exaggeration; a small shortage or surplus produces a large movement of prices; adjustments to all kinds of change are magnified by the herd instinct driving most specula- tion; one corporate miscalculation or crime destroys thousands of jobs. The consequences of exaggeration ”” the uncertainties, inefficiencies, inequities for people ”” are intensified in a glob- al economy. The corrective role of government is more rather than less necessary to safe- guard the public interest. The difference is that more of it must be multinational action. That is evolving: too slowly, of course, with some steps forward and some back. Too much of it may too long be dominated by a cabal of rich nations. But international economic management will evolve in one way or another. Globalization compels it.
One implication for Canada is plain. It is increasingly in our interest to return to a significant role in international counsels. That was earned, for the first 25 years or so of the postwar world, by the quality of Canadian politicians and public ser- vants. The necessary talents have sure- ly not disappeared. With leadership, they could be recruited again.
The re-focus needed in domestic policy is just as plain, but considerably more complicated to achieve.
Money can be moved readily any- where. So can applied technology. The industrial facilities required to produce easily-shipped consumer goods can be established wherever there are plenty of eyes and hands to do routine work. In this competitive world, a society can be affluent only if many of its jobs use advanced technology or are otherwise highly specialized. They have to add enough value, in the language of eco- nomics, to earn high incomes within the global economy. And many of the jobs that do so today will before long migrate, their product outsourced.
None of this is altogether new, but it has accelerated, and is set to go on accelerating, faster perhaps than any previous economic trend. The prosperity of an advanced economy turns as never before on the knowl- edge, the advanced skills, the enter- prise and ability to innovate, of its people. The crucial investment, as economists have come to say, is investment in our human capital. The public services that will do most for the national product, for employment and income, are the services that enhance people, that enable them to develop their abilities and enlarge their opportunities. They are, in large part, the services that used often to be thought to be in conflict with the hard realities of economics.
The consequences for the governance of Canada are pro- found. The constitutional responsibility for the economy is federal, because otherwise there would have been no nation in 1867 and there could be none today. But Ottawa’s familiar instruments for that purpose are blunted by globalization. To serve us still they must be accompanied by the services classed as social, by the educa- tion and health care that belong jurisdictionally to the provinces.
For 60 years social policies have equalled, at times eclipsed, eco- nomic issues ”” jobs, prices, taxes ”” as the concerns that most move people to vote, federally as much as provincially. As Paul Martin most forcefully demon- strated when he snatched at survival last June, the promises by which feder- al governments stand or fall are main- ly to fix programs in provincial jurisdiction.
This evolution of our federalism was necessary because, while the juris- diction for most social programs is provincial, the financial capacity to discharge it varies greatly among our disparate provinces. Comparable levels of taxation across the country are essential to a national economy but are possible only if a good part of the cost of provincial programs is provided from federal revenue. We have long recognized that as crucial to our social union. It is now equally central to the strength of our economy.
Societies are bonded by people sharing purposes important to them. Occasionally they are invigorated by consensus on a new emphasis of pur- pose. The emphasis that might do that today seems clear. Opinion leaders from Right to Left agree that the mak- ing and sustaining of a prosperous, equitable, equable society now requires, above all, investment in the abilities of people.
The opinion is robust, as yet the action is not. The reason goes deeper, I think, than the familiar, jostling con- fusion between federal and provincial responsibilities. It is the fundamental democratic deficit: not the failings of Parliament, which are a symptom, but the disconnect of people from political parties, which is the cause.
One consequence of that discon- nect is the elitism of most political opinion about investing in human capital; it concentrates on the quali- ties and fees of universities. For years the federal government has involved itself in funding for academic chairs and scholarships. Its professed con- cern for early childhood care is only now, under the pressure of the almost-lost election, emerging into some kind of action.
Certainly post-secondary educa- tion needs attention. But inadequately served university students are a lesser part of our wastefulness with human capital. Deprived children are a far greater part.
Contemporary research has estab- lished what the Jesuit order was remarkable for recognizing long ago. The adult is shaped, in large measure, by experience early in childhood. The implication is plain. Child poverty is not only a disgrace to an affluent society. The capability of our econo- my requires us to give the highest pri- ority to public services that counter obstacles to the development of youthful abilities.
Those disadvantages are most closely associated with poverty, but by no means con- fined to it. Well-to-do couples can lack time and energy for good parenting. Rich homes may be broken, lifestyles anti-social, health little cared for, mental stimulus minimal, lack of siblings uncorrected by socializing play. Combating deprivation does not mean targeting poor children. It calls for universal access, free from any discrimination.
Inevitably, the extent to which the new childhood serv- ices are used will vary in part with income; how the services are paid for certainly should. But the aim is that even class-conscious parents should have minimal motivation for taking their children out of the public system. Investment in human capital is a democratic purpose. A purposeful government could give popular mean- ing to it. It could declare, for all Canadians, our Children’s Charter.
The Charter of Rights and Freedoms is precious for all. I’m not suggesting a special constitutional amendment for children. The appro- priate derivation from the Constitution is an act of Parliament declaring that Canadians old enough to vote will dis- charge their civic obligation to those who are not old enough. The act would instruct the government of Canada to do everything possible, within its resources and in cooperation with provincial and territorial governments, to ensure that all Canada’s youth have full access to the public services and amenities that help to develop their abilities, to equip them to make their full contributions to Canadian society in their adult lives.
Those words can certainly be improved but the intent, I hope, is plain. More eloquently expressed, it could be a call to action that resonates powerfully across Canada. It could be brought most forcefully home by embodying its terms in a certificate issued to a parent or guardian of every child. That might serve as a special goad to public agencies to end their neglect of disadvantaged groups, most notably the federal govern- ment’s continuing failure to redress its long disrespect for our First Peoples.
Whatever the words, however, they will fade into another promise forgotten, unless we have politicians who know how to fit the mechanisms of a federal system to the requirements of the times.
The mechanisms that used to work are broken now. The present gov- ernment is determined not to repair cost-sharing. Instead it improvises, when political pressures compel, dona- tions to provincial programs.
A rich person’s donations may give a name to a building or an academic chair or an occasion. What I call sugar- daddy federalism can give the federal politicians of the day more recognition than the continuing commitment of cost-sharing. But it’s no way to run a country. It elevates the politics of the moment over reliable, sustainable pub- lic policy. It ensures continual tension in federal-provincial relations. It’s not the steady cooperation that’s essential to reconciling the jurisdictions of fed- eralism with the necessary mingling of socio-economic policies.
In the scheme of the 1950s and 1960s, cost-sharing was supplemented by equalization, topping up the finances of the poorer provinces. In theory, more equalization could replace support for particular pro- grams. In practice, it won’t, because for federal politicians committed equaliza- tion is even more unrewarding than cost-sharing as a use of tax dollars. The present government is therefore mov- ing away from it. The supposedly con- stitutional principle of equalization has just been subverted by using it as a cloak for another donation.
Globalization makes it more neces- sary than ever that, in a land of provincial disparities, federal taxation be brought to the aid of the major socio- economic programs. That is now required equally for the justice of our social union and for the strength of our economy. It calls for a different mecha- nism: neither a return to cost-sharing nor its present replacement by impro- vised donations. The focus we need now is on using federal money, not to subsi- dize provinces but to empower people.
That’s different from most of what we were doing and are doing now. However, it’s by no means novel and untried. On the contrary, the first social program that transformed the lives of millions of Canadians was begun sixty years ago. It was, of course, the federal program paying family allowances directly to mothers.
Computerization enabled that to be replaced by a more efficiently tar- geted program, but the principle of direct payment to people is in no way changed. There are only two things wrong with the Canada Child Tax Benefit. Raising it to the minimum cost of adequate nurture has not been given the priority it should have. And its value for children is limited because it has not been accompanied by a parallel reform for other family income. That would begin if the basic tax allowance were replaced by a refundable credit.
For early childhood care and edu- cation, the federal responsibility would be best discharged by reimbursing the fees parents have to pay for the service. For a parent whose income is too low to be taxable, there would be the same full reimbursement that a refundable tax credit provides. For others, the ben- efit would be taxed, at moderate rates on moderate incomes and to its full amount on very high incomes.
The desperate Liberal promises of the 2004 election campaign have also established priority for federal aid to cities. Nothing in the Constitution is clearer than provincial jurisdiction for municipal affairs. Federal intervention will relieve the pressure on, say, the B.C. government to do more for Vancouver. How much else it will do, even for the big-city mayors who have so actively promoted it as a counter- weight to their provincial govern- ments, can at this stage only be guessed. It threatens endless disputes as well as confused accountability. Certainly it promises great trouble for a federal government that is already busy beyond the limit of its compe- tence in decision-making. The prime minister would be wise to set the cities file aside for a while. But if that cannot be, he might free John Godfrey to look for direct ways to help the people who suffer most from the inefficiencies of big cities. Financing affordable homes close to work, in Toronto and Montreal and Vancouver, could do a lot more to improve the quality of life than subsidies for the provinces to pass on to all their municipalities.
There are indeed many purposes for which federal finance could be well directed to income-related support of individuals. Among the higher priori- ties, if and when the government has the required competence as well as money, are some sectors of education. Access to post-secondary schools could be most effectively and fairly broad- ened if the presently troubled loan program and limited scholarships were replaced by a revolving fund of federal advances to students, with repayment obtained through an income-related surtax on subsequent earnings. A simi- lar system could support later educa- tion and occupational upgrading. The big cities would be particularly helped by more federal financing of the settle- ment and language training of immi- grants. Our most irrational waste of human capital would be reduced by aid to immigrants whose professional qualifications require integration into Canadian practice.
Despite the waiting lists, medicare is still pretty good at making treat- ment available for all Canadians accord- ing to need. But prevention, as opposed to treating sickness, still ranks low in the services to which federal financing is supposedly related. A constructive policy for health would emphasise care in childhood and youth. It would be truly comprehensive, covering eyes and teeth and prescription drugs as fully as medical attention. It would provide reg- ular check-ups, immunizations, nutritional supplements.
I’m suggesting that a comprehensive commitment to the health of youth should be added as a sixth prin- ciple to the Canada Health Act. Reimbursement for the addition would be a permanently legislated commitment, not another periodic donation. The direct benefit for Canada’s youth and the country’s future is not the only merit of such an initiative. It would give Ottawa the identified role in health care for which it has been clutching by shift- ing improvisations. There would be some break from the tired controver- sies to which medicare has been so long subject. It’s even conceivable that there would at last be agreement on effective measures to contain some of the costs of existing services.
It must be emphasized that in all of this I have been suggesting a con- temporary focus for public policy, stretching beyond an agenda for today. The pace of action will depend partly on circumstances outside Canadian control; partly on politics hard to foresee; very much on the ability of government to make up its mind on practicable priorities and to manage accordingly; most of all, on how far public finances are improved, as sooner or later they will have to be, by the reform of a tax sys- tem in grave disrepair.
I’m not a believer in the political rel- evance of anything so grand as having visions or dreaming dreams. But one thing experience has taught me is that solid public achievements require the context of a larger purpose, a sense of direction, a feeling for the future. That is why I have tried to distill the main thrust of policy in the idea of a children’s char- ter. And it leads me to emphasize again that much of the federal government’s role lies in financing the access of all Canadians to services that provincial governments, in varying ways, provide. Cooperative federalism has long been central to our social union. It is now equally crucial to the Canadian economy.
This article is adapt- ed from the James Mallory Lecture at the McGill Institute for the Study of Canada, November 2004.