The three most important prob- lems and policy challenges Canada is facing over the medium term are basic education, the aging population and national cohesion.

First comes basic education. I agree with those who keep insisting that more needs to be invested in university edu- cation and training. But I think our most pressing task as a nation is even more fundamental. It is to foster basic skills such as literacy and numeracy. Let me suggest three reasons for this. One, recent empirical research on the sources of well-being provides broad support for the view that further income growth in advanced countries has only a small effect on the well-being of those at or above the average income level, but a significant impact on the well-being of those at the bottom of the income scale. Two, also according to recent research, raising literacy and numeracy at the bot- tom of the skills distribution is more important to economic growth across countries than producing more highly- skilled graduates and more investment in physical capital. We should consider- ably strengthen the quality of kinder- garten-to-high-school education, and fight the high-school dropout rate with more conviction and more resources. Three, if the theorems of international trade have any meaning, the arrival of a billion new workers from emerging countries in the open world labour mar- ket over this decade and the next is bound to have consequences for the fate of low-wage workers in Canada and other industrial countries. Focusing on the development of the basic skills of our workforce at the bottom of the pro- ductivity scale is the only sensible response to this outside challenge.

The second problem we should worry most about is the coming demographic storm. Let me focus on Quebec, which will be hit sooner and harder than other parts of the country. Over the next 25 years, Quebec’s employment-to-total-population ratio is set to drop by 14 percent; that is, from 49 percent today to 42 percent in 2031. Meanwhile, those aged 65 and over will double in proportion to 27 percent of the total population in 2031 from 13 percent today. This is going to create enormous stress on the private lives of the younger generations. Because they will be few and their aged parents will be numerous and live long lives, their personal burden will increase sharply. Public finances will also be hard hit. With 14 percent fewer young people to pay taxes and twice as many elderly people on health care " fortunately, the public pension system is on a better foot- ing ", a financial black hole will devel- op in provincial finances. If the 2031 projected age structure were to prevail today, the current $55 billion provincial budget would go from balance to a $14 billion deficit. If nothing is done quick- ly to deal with this demographic shock, there will be more and more intense and bitter fights among social groups to appropriate smaller and smaller chunks of the public budget. Many of our high- ly educated, multilingual and globalized children will emigrate, taxes will increase significantly, provincial spend- ing other than on health will be slashed, and deficits and debt will balloon. There is just one effective way out: repay the public debt in order to reduce the debt service and to provide fiscal room to replace the falling revenue and absorb the rising health expenditures.

The third and last challenge I want to put forward is that of national cohesion. The Liberals of the Trudeau generation, ending with Chrétien, were generally successful in the area of social policy " at least until the mid-1990s. But they have objectively made a mess of our national cohesion. Thanks to Trudeau and his team, Alberta and Quebec have become estranged parts of the Canadian nation. In 1980, the Trudeau Liberals showed total contempt for the spirit if not the letter of the con- stitution when they imposed their National Energy Policy on Alberta. In 1982, they repatriated and amended the Constitution against the unanimous opposition of Canada’s national mino- rity, concentrated in Quebec, which ironically had just firmly said no to sep- aration. Further, in 1990, with their provincial allies in Manitoba, New Brunswick and Newfoundland, they tor- pedoed a fair and honourable attempt to correct this failure. As a result, the then-almost-dead sovereignist move- ment was resurrected, the 1995 referen- dum was extremely tight and another one will possibly take place in a few years. In addition, our traditional national party system has collapsed into fractious regional political movements and political instability at the federal level has increased, with minority gov- ernments more likely than in the past. It is the mark of great federations that they show respect for their national minori- ties and for the constitutional preroga- tives of their constituent states. In doing just the opposite, the Trudeau Liberals have pitted Canadians against Canadians and have dishonoured the Canadian federation.

It is time we got out of this mess. The coming to power of the new Conservative government provides a window of opportunity, maybe a short one, to reconstruct national cohesion, and bring Alberta and Quebec back to where they should be: at the core of this country’s identity.