Social Policy in Ontario

We need new thinking to meet Canada’s new challenges

Posted on December 26, 2014 in History

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TheStar.com – Opinion/Commentary – Job One for whichever party forms the next government in Ottawa should be to establish this generation’s version of the Macdonald Commission.
Dec 25 2014.   By: Eugene Lang

Next year will mark the 30th anniversary of one of the most significant milestones in modern Canadian public policy. In September 1985, after three years of public hearings and exhaustive research, the Royal Commission on the Economic Union and Development Prospects for Canada, known as the Macdonald Commission after its chairman Donald Macdonald, issued its report.

Established by prime minister Pierre Trudeau at the midpoint of his final mandate, the omission reported in the second year of Brian Mulroney’s first term in office. The report, three volumes in length, produced a broad policy consensus that facilitated over time a fairly radical shift in the role of government in the Canadian economy. And in so doing it guided four successive governments of three different political stripes.

The severe economic conditions that afflicted Canadians when the commission was struck in 1982 — 12-per-cent inflation, 13-per-cent unemployment, 18-per-cent interest rates and a brutal recession — played a significant part in concentrating the Trudeau government’s mind. But it was the economic malaise of the 1970s and the inability of governments to do much about it that gave rise to a more general view that a new approach to policy was needed.

Fiscal fine-tuning and a relatively regulated, mixed economy linked to income security programs like universal family allowances and generous unemployment insurance, helped produce the prosperity and strong economic growth that characterized 1950s and ’60s Canada. But by the early 1980s it was increasingly apparent that this “Keynesian” model had run its course.

Enter the Macdonald Commission, which was given the mandate to mobilize the best minds in the country — drawn from the business community, the labour movement and academia — to develop Canada’s new model of political economy for the late 20th century.

By the time the commission was established, the neo-liberal credo — grounded in the benefits of free trade and foreign investment, privatization, deregulation, low inflation, balanced budgets, tax cuts and a pairing back of the welfare state — was taking hold in several countries. The Macdonald Commission firmed up and gave voice to Canada’s emergent neo-liberal consensus.

The commission’s best-known recommendation was free trade with the United States. But there were many other neo-liberal notions in the report, including privatization of Crown corporations, fostering greater domestic competition, reduced market intervention generally and a more targeted and incentives-based welfare state.

Over time, the Macdonald variant of neo-liberalism took root and supplanted Keynesianism in Ottawa, especially in the federal public service and in the three political parties that have alternated in office, the Progressive Conservatives, the Liberals and the Conservatives. The broader policy community — notably university faculties, think-tanks, consultants and the media — also caught the neo-liberal bug.

And by and large, the orientation and reforms recommended by Macdonald were appropriate for a time when the major structural problems this country faced were inflation, persistently high unemployment, perennial fiscal deficits, and an imperative to adapt to the first wave of globalization and technological change. However, those are not Canada’s major challenges today.

Inflation was quelled nearly 20 years ago with reforms to monetary policy. Unemployment rates today, even during recessions, come nowhere near where they were a generation ago. Deficits remain problems for many governments, but the fiscal crises we experienced in the 1980s and ’90s are a distant memory. And Canada has taken many steps to liberalize trade and investment policy.

Nevertheless, the core neo-liberal ethos remains embedded in our policy DNA. And like postwar Keynesianism a generation ago it is constraining our thinking in responding to the big policy challenges of today. Those challenges, by the way, are no less serious, although much less apprehended by most of us, than those that spawned Macdonald 30 years ago.

Canada’s public service and most of our politicians have been steeped for so long in the neo-liberal view of government’s role in the economy that they cannot conceive of another model. Neo-liberal beliefs have become unshakable and central to legitimacy and standing within the broader Canadian policy community. Consequently, many core elements of the doctrine — particularly the view that government should almost never intervene in markets — go unchallenged, much like tenets of a religion. Those that do take on the orthodoxy are considered untutored or heretics.

The range of acceptable policy analysis and debate is thus seriously limited. This hamstrings the agendas we get from politicians. As a result, Canadians get nowhere near the scope of policy choice exhibited in continental Europe where the neo-liberal world view has never been embedded as deeply as it is here.

So what are the big policy frontiers Canada faces today for which we need a road map or a new policy model? Four spring to mind:

– Productivity growth is essential to improvements in living standards. Unfortunately, Canadian productivity growth is weak by historical or international comparative standards. For a quarter century, successive governments in Ottawa have followed the standard neo-liberal recipe for improving productivity — significantly lowering taxes on capital and income; opening Canada to trade and investment; and spending on research and development. For whatever reasons, it hasn’t worked. Canada’s productivity growth today is worse that it was 15 years ago. New policy thinking on this issue is needed to ensure the rising living standards Canadians expect.

– Canada is a carbon-intensive economy. We are both blessed and cursed with carbon-heavy industries. And for a variety of reasons Canadians emit a lot of carbon on a per capita basis. But the world is inexorably moving to a lower carbon future and Canada must make that transition as well in a way that Canadians will embrace. We need to build that consensus and develop the policy road map to get us there.

– Income inequality has grown significantly over the past generation. Yet there is no agreement on the degree to which this is a problem for our society and economy that might require a strategic public policy response. And there is almost no discourse on what that response might be. We need this issue cracked.

– Finally, Canadian federalism is broken. Maybe it has always been in a state of relative brokenness. But it seems more fragmented today than two decades ago. The federal government is far too unilateralist and dismissive of provinces, especially their fiscal demands. Provincial politicians are increasingly parochial at a time when our collective problems demand from them a pan-Canadian impulse. Today’s federal-provincial issues do not require constitutional reform, but they do call for a new federalism — which might mean new institutions — where governments work more co-operatively and are guided by a common idea of Canada.

Our history shows us that about once a generation Canada needs a major economic policy rethink. The normal instrument to achieve this is the Royal Commission.

In 2015 Canadians go to the polls to elect a federal government. Job One for whichever party forms that government should be to establish this generation’s version of the Macdonald Commission. Like Macdonald three decades ago, the new commission should have the mandate to develop the broad policy consensus needed for a new model of political economy that provides the foundation and ideas for this generation’s politicians and public servants to chart Canada’s next economic policy course.

Eugene Lang is BMO Visiting Fellow and Interim Co-Director, Glendon School of Public and International Affairs, York University.

< http://www.thestar.com/opinion/commentary/2014/12/25/we_need_new_thinking_to_meet_canadas_new_challenges.html >

Tags: economy, featured, globalization, ideology, standard of living

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