History by the numbers favours Mulroney and Chrétien, while Trudeau leaves a legacy of deficits and debt.
How well did Canada’s most recent major prime ministers do as stewards of Canada’s economic welfare? What criteria would be appropriate for making such an assessment? The man in the street’s gut feel- ings, fed by popular media perceptions, might be to praise Trudeau, bury Mulroney, forget St-Laurent, Diefenbaker, and Pearson, and consider it too early to assess Chrétien. The man in the street would also be wrong.
More than for other prime ministerial legacies, their economic ones rely on objective criteria. As a relatively open economy, for example, Canada’s performance as a trading nation can provide useful insight into a govern- ment’s economic stewardship. Equally, the fiscal state of the country at the beginning and conclusion of a prime minister’s period in office can be an important indicator. Then there is the misery index of inflation and unem- ployment levels, as well as such data as exchange rates, economic growth, and interest rates. This article focuses on the first three criteria as the major pointers to the stewardship of the gov- ernments of the six most recent full- term prime ministers, and throws in a few of the other factors where they are helpful in fixing praise or blame.
When the young Princess Elizabeth ascended to the throne in 1952, and at the time of her corona- tion in June 1953, her Canadian dominion was firmly under the man- agement of the Liberal Party, with Louis St-Laurent serving as its manag- ing director, having taken over the reins of power upon the retirement of Mackenzie King in 1948. His hold on power had been confirmed in the gen- eral election of 1949 and would be extended for a further mandate in 1953. This final phase of the long Liberal hegemony was by 1953 in its ninteenth year, dating back to 1935. St-Laurent’s core team consisted of veterans like himself, Douglas Abbott at Finance, Jimmy Gardiner at Agriculture, and the minister of every- thing, C.D. Howe, at Trade and Commerce and Defence Production. It had been enriched by the addition of Lester Pearson at External Affairs. Together, they offered sound, smooth, predictable, and pragmatic gover- nance, carefully matching their own preferences to those of the popular will, broadly considered.
On the trade front, St-Laurent and his ministers and officials expended considerable effort to find the most realistic and workable trade regime, one that opened markets for Canadian agriculture and resource producers but that protected the vulnerable Canadian manufacturing sector. Their approach to fiscal policy was similarly cautious and pragmatic and brought unspectacular but positive results: balanced budgets, low inflation, and politically acceptable levels of cyclical unemployment. The overall impact was a steady improvement in Canada’s economic prospects, a reality well cap- tured by the Final Report of the Royal Commission on Canada’s Economic Prospects in 1958.
Not everyone agreed that the St- Laurent Liberals delivered the best possible policy to pursue Canada’s economic development. Tory national- ists disliked the individualism of clas- sical liberalism and the continentalism that flowed from Canada’s geography. They preferred the ties of history, Empire, and sentiment to those of geography, technology, and economic interests. Economic nationalists simi- larly deplored the US connection be- cause it tied Canada into the world’s pre-eminent capitalist economy and undermined Canada’s ability to act independently. What they wanted was a Canada that could pursue its own destiny, often defined as anything but that of the United States.
These concerns, however, engaged only a few. By the middle of the decade, most Canadians had many good reasons to be satisfied. Canadians had begun to enjoy a high and rising standard of living and an increasing range of government services. For the first time in Canadian history, the growth in the economy " output rose 64 percent between 1944 and 1957 " had come largely from domestic demand. New investment had risen 249 percent while government capital spending during this period had risen by 776 percent. Domestic demand out- paced foreign demand to the point that exports steadily declined as a percent- age of GNP. The economy had become more diversified and capable of provid- ing Canadians with a growing array of goods and services and with high- paying jobs. Canada had become more urbanized and the quality of life, at least materially, had improved with it. Canadians could look with satisfaction at a government that had delivered the prosperity it had promised. Looking back from the perspective of 2003, we can appreciate even more the benefits Canadians had derived from the mana- gerial competence of St-Laurent and his colleagues, setting a standard that his successors would find difficult to match, let alone surpass.
But political success requires more than managerial competence. By the mid-1950s there seemed sufficient dis- content to sweep the Grits from office and install a minority Tory govern- ment under their new leader, John Diefenbaker, bringing to an end a gov- ernment that had served Canada well but had become somewhat tired and arrogant in the process. In 22 years, the Liberals had at one time or anoth- er offended a lot of groups, from wheat farmers to anglophiles. Could Diefenbaker and his ministers respond to their complaints and do better?
As it turned out, they could not. In fact, they did worse. Neither Diefenbaker’s 1956 successful leader- ship campaign nor his winning elec- toral campaign in 1957 offered much insight into either his domestic or foreign economic policy. Diefenbaker, though clearly a man of deep convictions, was not much given to introspection about policy issues. His nearly six years in office con- firmed that he merely reacted to events and was not prone to long-term planning or the pursuit of clear objectives.
Many of his decisions were coloured by personality clashes and reflected his strong sense of para- noia. For those charged with prepar- ing policy advice for his government and implementing its decisions, Diefenbaker’s leadership turned out to be a trying experience.
Some of his ministers, on the other hand, left a strong and positive legacy, despite increasing problems within the Cabinet. Donald Fleming and George Hees, for example, ably executed their mandates at Finance and Trade and Commerce. Indeed, Hees is fondly remembered by the Trade Commissioner Service as one of its most enthusiastic and support- ive ministers. Ultimately, however, Diefenbaker himself left a strong mark on issues of central policy and it is his legacy that must be consid- ered. From a trade and economic pol- icy perspective, that legacy was largely a matter of bluster, indeci- sion, and deterioration.
Neither Diefenbaker’s anglophilia nor his anti-Americanism, for example, translated into constructive policies. He had never been shy about his dislike of the Americans as a nation. Once in office, however, there was continued rhetoric but little seri- ous effort to reduce Canadian depend- ence on the US market or to reduce US investment in Canada. Diefenbaker’s ministers used the occasion of the first meeting of the Joint Canada-US Ministerial Committee to express their desire to try to diversify Canadian trade. In return they received little more than a sarcastic rejoinder from US Secretary of State John Foster Dulles that that was Canada’s busi- ness. Dulles also reminded them that the US was a cash customer and pro- vided Canadians with the goods they wanted. As Dulles and his colleagues learned, the Diefenbaker govern- ment’s bark was worse than its bite. Indeed, it rarely bit and when it did, it was more likely to hurt itself as much as its intended victim.
Monetary policy provides a com- pelling example. Since 1950 Canada had technically been in violation of the IMF by maintaining a floating rather than a fixed exchange rate. Canada’s excuse was its proximity to the United States and its heavy depen- dence on the US market. A floating rate, however, enables a government to fiddle with the exchange rate, and when the Conservatives began actively to try to lower the Canadian exchange rate in 1961, markets did not react favourably. Reducing the value of the dollar might have helped to boost ex- port sales, but it also had more delete- rious effects, including a flight of capital and a precipitous reduction in Canada’s reserve position.
On other economic factors, Diefenbaker’s record is equally trouble- some. While inflation remained low, unemployment increased, aggregate growth rates stagnated and the burden of government spending increased, as did taxes. On the trade front, Diefenbaker exacerbated a number of Canada-US files (e.g., the extraterritorial application of US law), missed opportunities at both the Dillon Round of GATT negotiations and in the lead up to the Kennedy Round, and complicated trade relations with Britain as he huffed and puffed about Britain’s on-again, off-again efforts to join the Common Market. Only his pio- neering wheat sales to China cast a bright light during his tenure.
During his nearly six years in office, Diefenbaker never over- came his suspicion of the senior bureaucracy. He remained con- vinced that External Affairs was full of ‘Pearsonalities’ and that other senior officials were all friends of the leader of the oppo- sition. Ironically, by 1963, with the return of the Grits, there were Liberal partisans who shared some of Diefenbaker’s suspicions that senior officials could not be trusted to carry out the new government’s program. Like Diefenbaker before them, the newly elected Grits failed to appreciate the extent to which good policy must respond to the realities within which Canada operated, including the realities of adapting to the policy preferences of other countries. Officials could be as nationalistic as Diefenbaker or Walter Gordon, Pearson’s mentor and first finance minister, but it was a na- tionalism tempered by a clear apprecia- tion of the limits of idealism. Pearson’s five years in office continued the roller- coaster ride of trying to find the balance between the professionals’ preferences for pragmatic solutions to specific prob- lems and their critics’ zeal for more ide- alistic and nationalistic approaches.
Diefenbaker had demonstrated that getting under the skin of the Americans on virtually every file was a sure way of frustrating the attainment of Canadian objectives. Pearson was more selective, reflecting the outlook of most Canadians. In 1963 Canadians were generally still well disposed toward the United States and particu- larly its energetic young president, John F. Kennedy. The Vietnam War would change that and make anti- Americanism a creed with which more and more Canadians could identify. The war introduced a cynicism about the exercise of power that corroded attitudes along a much wider range of issues than those related to defence and security, and gave economic nationalism a respectability that it might not have attained otherwise.
Pearson’s cabinet was divided among pragmatists and national- ists, with the prime minister siding with one group on some issues and with the other group on others. Walter Gordon anchored the more nationalis- tic and interventionist wing, while Mitchell Sharp and his more cautious and pragmatic Cabinet colleagues believed the problems Gordon and his supporters had identified were not as severe nor the solutions as necessary as he claimed. In this approach, they had the full support of the professionals in the public service. Gordon never learned the critical role the public service plays both in developing and implementing policy. Sharp, the former man- darin, did know and used this knowledge to his advantage.
On the trade policy front, the years from 1963 to 1968 proved reasonably successful. Certainly they were more fruitful than the previous half decade. The Canada-US Auto Pact provided the basis for the devel- opment of a large, productive sec- ondary manufacturing sector in Ontario, demonstrating the critical role of foreign direct investment and open markets to Canada’s economic prosperity. The Kennedy Round of GATT negotiations further consoli- dated and strengthened the position of the resource sector as world-class in supplying forest and mining prod- ucts to markets in the United States and, increasingly, Europe and Japan. Other manufacturing industries had seen some erosion in their protec- tion, but not enough to induce those industries to look beyond the domes- tic market. With the exception of the grains sector, agriculture did not fare as well, and was becoming more and more dependent on the domestic market. Trade relations with the United States were better than previ- ously, but there were storm clouds on the horizon. New opportunities in more distant markets were beginning to be realized even as the interdepen- dence of the Canadian and US economies deepened.
When Pearson handed the reins of power to his successor, Pierre Elliott Trudeau, he had presided over five years of solid growth, averaging over 6 percent per year, a rate that would allow the economy to double in size in less than 12 years. He had improved both the country’s fiscal and interna- tional payments positions, he had introduced a range of popular new programs, and he had made Canadians feel good about themselves during the centennial celebrations in 1967. He had also burdened the country with new programs and policies, however, that would steadily increase costs and expectations and drive the country toward bankruptcy. The combined impact of international and domestic forces were also fuelling inflation and increasing levels of both structural and frictional unemployment.
As Trudeau would learn over the course of his nearly 16 years in office, the strengths of Pearson’s record were built on a weak foundation. By the time Trudeau took his walk in the snow in February 1984, both Canada’s fiscal position and international payments positions were in a parlous state. Trudeau and his ministers had demon- strated a continuing inclination to ignore the warning signs, concentrat- ing instead on politically persuasive short-term nostrums. Its focus on con- stitutional, social, distributional, and similar issues had come at the expense of sound economic stewardship.
In April 1968, Trudeau inherited an economy at the top of the business cycle. The buoyant times evident dur- ing the Pearson years continued for nearly five more years, and then came to a crashing halt, ending a quarter century of sustained expansion and ushering in a decade of uncertainty. Canada was not alone in experiencing economic turmoil, suggesting that international forces played a large role. Domestic factors, however, were also important, including the impact of policy choices that tried to shield Canadians from international pressures and avoid desirable adjustments.
From the late 1940s until the early 1970s, Canadian governments had pursued countercyclical budgeting in an effort to stimulate economic growth and full employment while maintaining budgetary discipline. By the 1960s, however, governments began to believe that they could do more and decided they could also repair the economy’s failings and redistribute income to create a more just society. To these ends, the Pearson government had pursued an activist social agenda, convinced that in a richer Canada, governments could do more to help poorer Canadians. The Trudeau government decided to go even further, trying to shape Canada’s economic development along politi- cally more acceptable lines. Trudeau thus presided over a government often eager to expand the role of the state. Some seven departments, 14 ministries of state, and 114 new agencies, boards, and commissions were created during the Trudeau years to advance regional development, science and technology, urban affairs, the environment, inter- national development, and more. Throughout government, officials learned the rewards of policy and pro- gram activism.
Trudeau’s efforts were complicated by the federal structure of the gov- ernment and large regional disparities. The smaller provinces did not com- mand the same resources as the larger ones, thus adding to the conviction that the federal government should " and could " tackle both personal and regional disadvantage. Additionally, more than any other member of the OECD, Canada faced the fastest grow- ing labour force, spurred not only by the baby boom bulge, but also by the impact of rising participation by women in the labour force and continuing high levels of immigration. Accommodating these additions added to inflationary pressures. Finally, there developed a high level of resistance on the part of both government and indus- try to adapt and adjust to new econom- ic forces, particularly in the weaker manufacturing sectors, adding to the attraction of the crank solutions offered by nationalists and interventionists.
Over the course of the 1970s, Trudeau’s more interventionist minis- ters and advisors discovered more and more market failures requiring govern- ment action. Rather than being deterred by clear market signals of looming economic problems, they maintained that the boom of the post- war years was the direct product of demand management and, with patience, their efforts would be reward- ed. Those who held that the boom years had been grounded in the fiscal caution of the King and St-Laurent years were dismissed " not always log- ically " as heartless, or were accused of trying to turn Canada into a miniature replica of the United States.
The results, however, were not encouraging. GDP growth fell from 7.7 percent in 1973, to 4.4 percent the fol- lowing year, to 2.6 percent in 1975 and stayed in that range for the rest of the decade, only marginally above popula- tion growth. Unemployment steadily climbed from 5.3 percent in 1974 to 6.9 percent in 1975 and reached 11 percent in 1982, while inflation averaged over 10 percent from 1974 through 1982. Some of the inflation was the result of interna- tional forces; more was due to purely domestic factors, although other coun- tries were experiencing similar problems as a result of similar policy choices.
The profligacy of the 1970s also sent budgetary deficits spiralling out of control. Between 1968 and 1985, the federal government doubled its spend- ing, in real dollars, on each citizen, reaching some $4,750 in current dol- lars in 1985. Concurrently, per capita tax revenues steadily declined, ensur- ing a growing deficit crunch. Andrew Coyne calculates that: ”œnet federal debt in fiscal 1968…was about $18 billion, or 26 percent of gross domestic prod- uct; by [Trudeau’s] final year in office, it had ballooned to $206 billion " at 46 percent of GDP, nearly twice as large relative to the economy…In 1984-85, total spending exceeded revenues by more than 50 percent. The deficit that year, at $38.5 billion, was nearly equal to 9 percent of GDP…Every dollar of the $300 billion added to the debt dur- ing the Tory years was interest on the debt the Liberals had left behind.”
By the end of the 1970s, inflation appeared to be abating, only to heat up again after the second oil shock in 1979, leading to more experiments with tax cuts, but without any clear indication of a government with a sure sense of direc- tion or priorities. Canadians by this time had lost confidence in the Liberals, although they were not wholly pre- pared to put their full trust in the Conservatives and their new leader, Joe Clark. The result was the fifth minority government in 22 years, this time led by the Tories. It did not last long. By February 1980, Canadians opted once again for the Grits, handing Trudeau his fourth mandate.
Initially attracted to a full dose of activism, which included the National Energy Program (NEP), an effort to craft an industrial strategy, and two stimula- tive budgets, Trudeau and his ministers finally accepted defeat in the face of overwhelming international forces pointing in the opposite direction. The economic turmoil of the 1970s had fully discredited demand-side economic management and stimulated a reaction from supply-side monetarists. In the United States, Paul Volcker, chairman of the Federal Reserve, confronted by President Ronald Reagan’s stimulative combination of tax cuts and new mili- tary spending, decided the time had come to wring inflation out of the US economy, a view shared by most central bankers, including Canada’s Gerald Bouey. US and other interest rates reached unprecedented levels, leading to a global recession. Canadians found themselves renewing mortgages at rates in the high teens, while short-term treasury bills peaked at 22.75 percent. Canada did not escape the recession this time. The Trudeau government aban- doned wage and price controls, opting once again for moral suasion, urging large employers and provincial govern- ments to adopt its 6 and 5 program of voluntary wage and price restraints.
Canada was not alone in dealing with problems of stagflation, and these unsettled global conditions had a significant impact on Canada’s trade performance, although rising inflation hid the full impact of the slowdown in the growth in Canada’s merchandise exports and imports. The real value of exports declined in the period 1973-5, while imports stagnated. Over the next six years, recovery in both exports and imports remained at disappointing lev- els. Many Canadians fretted about Canada’s declining share of world trade. More important, however, were grow- ing signs that Canadian firms were not meeting global competition. Canada’s macroeconomic policy stance for much of the period exacerbated rather than facilitated the adjustment challenge.
Trade policy was not immune to the policy activism of the 1970s and early 1980s. By the early 1980s, however, it was clear that the two con- stants that had emerged in the decade following the Second World War would continue to dominate Canadian trade policy choices: the relationship with the United States, and the impor- tance of the GATT-based trade rela- tions system. Nevertheless, much energy was expended on exploring alternatives to both.
A plethora of initiatives were pur- sued in an effort to change the direc- tion and content of Canadian trade and investment flows. Alliances, agree- ments, and common cause were sought with a variety of non- traditional partners, all in an effort to diversify Canadian trade and industri- al patterns, increase the range of the Canadian economy, and reduce dependence on US markets and capi- tal. Few of them made much long-term policy sense and most tilted against the natural forces of geography, con- sumer preference, and business judg- ment. The only bright light was the government’s quiet commitment to make full use of the new round of GATT negotiations, the Tokyo Round, to improve market access for competi- tive Canadian producers and to expose the domestic economy to greater com- petition. Important and useful as the Tokyo Round proved, it was not enough to offset the many other trou- bling initiatives. In its dying days, Trudeau and his ministers toyed with a new bilateral initiative with the United States to free trade on a limited, sec- toral basis, but to little avail.
The activism of the 1970s did not lead to much change in the basic struc- ture and performance of Canadian indus- try. If anything, there was depressing evidence of just how difficult it is for governments to pick winners and how easy it is for losers to find governments. Government support for declining industries such as textiles, clothing, footwear, and furniture underlined the extent to which political and market judgments differ. Additionally, the economic turmoil of the decade undermined investor confidence and added to the woes of the weaker parts of the manufac- turing sector.
Trudeau did not claim that the land was strong when he left, at least not economically. Indeed, his successor, John Turner, ran against the govern- ment’s record and promised major change. Canadians, however, decided overwhelmingly to leave the clean up of Trudeau’s economic mess to Brian Mulroney and the Tories. Over the next nine years, that was the task to which Mulroney and his ministers dedicated their energies, a task that Canadians found increasingly difficult to accept, but which, with the passage of time, looks more and more impressive.
From a trade policy and trade per- formance perspective, Mulroney earns the highest score among the prime ministers under review for carrying through on the conviction that Canada needed to open its economy much more to international competi- tion by negotiating first the Canada-US Free Trade Agreement and then the NAFTA. He consolidated that effort by taking an active and forward-looking approach to the multilateral negotia- tions that transformed the GATT into the World Trade Organization. The combined impact of these three trade negotiations provided both an incen- tive and a reward for Canadian firms to adjust to greater international competi- tion, and thus provide Canadian con- sumers with a greater range of goods and services at world prices.
Mulroney’s trade negotiations were complemented by a range of other initiatives aimed at providing Canadians with a more competitive economy, including the conversion of the federal sales tax into the goods and services tax, regulatory modernization, the reduction of investment controls, privatization of many crown corpora- tions, and efforts to reduce inflation- ary pressures. The combined impact of these initiatives induced a major restructuring of the economy, including its reorientation along more economically logical north-south lines, allowing Canadian firms to become more specialized and competitive and integrated into North American-based supply and dis- tribution networks. Canada’s trade dependence nearly doubled as more and more firms became more specialized and trade oriented.
During Mulroney’s two terms in office, his government did less well in restoring Canada’s fiscal position. Mulroney inherited a situa- tion that most economists judged unsustainable. The federal government was spending substantially more than it was taking in from tax and other rev- enues, relying more and more on bor- rowing to finance its program spending and adding steadily to the national debt. Mulroney succeeded in restoring balance to the government’s operating budget through a combination of reduced program spending to levels approximating the government’s rev- enues and new taxes, but continued to rely on borrowing to finance the national debt. Over the course of their nine years in office, Mulroney and his colleagues added $300 billion to the national debt, all of it spent on servic- ing the debt inherited from the Liberals.
While Michael Wilson, Mulroney’s first finance minister, could not con- vince the prime minister to take tougher fiscal measures, he did work with Bank of Canada Governor John Crow to squeeze inflation out of the economy and strengthen the value of the dollar, even if these measures complicated adjustment to freer trade, and added to unemployment pressures.
Mulroney’s policies and programs put Canada fully on the road to economic recovery. His style, however, irked many Canadians, and combined with the pain that some of the adjust- ments required to make the Canadian economic sustainable in the long term, led to the greatest reversal in political fortunes in Canadian history. From a record 211 seats in 1984, the Tories under Mulroney’s hapless successor, Kim Campbell, were reduced to 2 seats in the 1993 election. While Canadians seemed almost unanimous in their rejection of Mulroney and the Tories, his successor, Jean Chrétien, proved over the next decade that he had no intention of undoing Mulroney’s policies. With the exception of a few marginal and symbol- ic changes, Chrétien accepted that the transformation in the Canadian eco- nomic wrought by the Tories neither could nor should be undone.
It is still too early to reach a full assessment of Chrétien’s trade and eco- nomic legacy. Based on his follow- through on two critically important policies, however, Chrétien deserves high marks. Building on the reforms and reorientation of priorities ushered in by Brian Mulroney, Chrétien succeed- ed in making freer trade the norm of Canadian foreign economic policy. Under Mulroney, free trade had proven a necessary but nevertheless controver- sial and divisive policy. By ignoring the policy instincts of some of his ministers and the criticisms they had expressed in opposition, Chrétien not only embraced the free-trade legacy, but built on it, making clear to all and sundry that free trade was now the default position in Canadian trade policy.
Similarly, Chrétien and his first finance minister, Paul Martin, accepted a second aspect of the Mulroney legacy and proved more adept and thorough in implementing it. Mulroney had made the case that Canada was living beyond its means; Chrétien did something about it, ruthlessly cutting program spending and transfers to the provinces, changing Canada’s fiscal posi- tion from an unsustainable deficit position to one of grow- ing surpluses. While some mem- bers of his cabinet continue to believe that Canada can out- grow its national debt, Chrétien has played the fiscal file bril- liantly, promising new spending dividends while sticking to the fundamentals of fiscal probity.
In summary, and focusing largely on the economic aspects of their man- dates, we reach the following conclu- sions about the six full-term prime ministers who served during the first fifty years of Queen Elizabeth’s reign:
- St-Laurent inherited a country basically in good political and eco- nomic shape, and left a country in similar shape for his successor. His strong suit, and that of his cabinet and senior officials, was manageri- al competence; they were prepared to engage government as neces- sary, but were not convinced that government programs and policies were necessarily the answer. St- Laurent’s transactional approach to problem-solving ensured that few problems became crises and most opportunities were pursued.
- Strong on zeal and purpose, Diefenbaker proved weak on resolve and delivery. An idealist with few pragmatic bones in his body, he proved that the Canadian federation is best gov- erned by those who know the value of compromise. He found a country in good shape and left it in worse shape.
- If Diefenbaker showed the limits of idealism, Pearson may have shown those of pragmatism. Of all the prime ministers under review, he appears to have been most com- fortable with a strong, if not always united, cabinet. He and his team inherited a country with some significant problems and managed to solve or lower the temperature on many of them. In short, he left the country in better shape than he found it, but he also accommodat- ed too many of the harebrained schemes of some of his ministers and advisors, creating a legacy that, in the hands of his successor, creat- ed problems that would come back to haunt the country.
- As time passes, the Trudeau lega- cy appears more and more limit- ed. A man of great potential and with charismatic voter appeal, much of his energy was misdi- rected on policies that went either nowhere or in the wrong direction. Withering in his criti- cism of nationalism in Quebec, he turned a blind eye to one mis- guided economic nationalist experiment after another. The result was a marked deteriora- tion in Canada’s fortunes on almost all fronts: economic, fis- cal, constitutional, internation- al, and national security.
- As time passes, Mulroney’s legacy looks more and more impressive. He inherited a country with a growing number of problem files. He left a country with many of them resolved or on their way to resolution. His economic initia- tives will prove particularly endur- ing and constructive.
- Chrétien inherited a country on the way to recovery from the excesses and damage of the Pearson-Trudeau legacy and had the good sense not to try to restore that legacy, building instead on the Mulroney record and complet- ing or strengthening some of the most important reforms. His strength lay in returning govern- ment to the managerial style of St- Laurent, reducing expectations and eschewing the transforma- tional, challenging approach of his predecessors. His third govern- ment, however, shows disturbing signs of a desire to restore some of the exorcised Trudeau elements.
The economy which Chrétien’s successor will inherit, of course, is vast- ly different from the economy of 50 years ago. St-Laurent managed an econ- omy fuelled largely by domestic demand. International trade was important, but hardly decisive. His gov- ernment possessed a full toolbox of interventionist policies that could deci- sively influence economic perform- ance. High tariffs, extensive regulations, a plethora of crown corporations and industrial and agricultural subsidies were accepted and widely used instru- ments. The postmillennium Canadian economy is fully integrated into the
North American economy. Domestic demand plays a steadily decreasing role in determining performance. Most importantly, the old instruments of intervention have either been aban- doned by virtue of multilateral and regional trade agreements, or have been largely discredited. What has not changed is the accountability of gov- ernment to the voters for economic per- formance. When the time comes to judge the economic stewardship of the next prime minister, the criterion will be how well expectations have been managed in an environment where available tools have become fewer.
Michael Hart is Simon Reisman Professor at the Norman Paterson School of International Affairs at Carleton University, and Bill Dymond is Executive Director of the School’s Centre for Trade Policy and Law. They are co-authors, with Colin Robertson, of Decision at Midnight: Inside the Canada-US Free- Trade Negotiations. Hart has been nominated for the Dafoe Prize, the Donner Prize, and the Smiley Prize for A Trading Nation, his definitive history of Canadian trade policy from the fur trade to free trade, which provides more detailed background for the assessments made in this article.