A Nation of Serfs? How Canada’s Political Culture Corrupts Canadian Values

Book Review, Equalization, Rebecca Walberg (historic), Role of Government, Think Tanks, Uncategorized

Most Canadians, educated in government-run schools, informed by publicly funded media, and taxed to the breaking point, are sure that massive state power and omnipresent government are the Canadian way. A Nation of Serfs? will astonish and anger readers with this predisposition. Mark Milke makes a solid historical case for limited government in Canada, shows how the values of Canada’s founders have been abandoned in favour of statism, and illustrates the damage done to our culture, economy, and political life by stumbling intrusive bureaucracy.

The obvious response to a book on Canadian government is to wonder how relevant it can be with a new Conservative prime minister. Serfs deals with this in the introduction, demonstrating that special interest groups, have-not provinces, and the beneficiaries of the Canadian tax system will work harder now, in opposition, than in the previous decade and a half of Liberal government. It is especially important that the corruption, dysfunction, and bloat of the status quo are brought into sharp focus.

Canadian political culture was shaped by the desire to be different from the United States, and to find a common bond. In the 18th century, the Loyalists who left the United States after the Revolution sought to ensure their new home would remain distinct from its neighbour. In the great wars of the 20th century, Canadians were aligned with Britain, rather than the United States. Under Trudeau, Chretien, and Martin, Canada’s foreign policy was used to tweak America more often than to defend Canadian international interests. Domestically, Canada was shaped by diverse and often brutal landscapes and climates, by clashes with natives in its earliest years, by Quebec separatism, and, more recently, by waves of immigrants from around the globe. In such a country, as Milke eloquently puts it, “an unquestioned preference for authority, for government in a variety of forms, made sense.”

Today, taxation and big government seem to be part of the Canadian identity. Very few people like them, but many see them as necessary for Canada to maintain the institutions that make up the nation. The conventional wisdom has it that taxes are very high, but universal health care and a social safety net require this; transfer payments cost the most productive and competitive provinces dearly but are fair to the have not provinces; and agricultural monopolies and subsidies are necessary in vital food industries for the protection of consumers and producers. Serfs overthrows these myths and shows why we often get the opposite of what we thought these policies would achieve.

The very word “equalization” implies fairness. The reality, though, is that transfer payments are based on a misconception, and they subsidize inefficient government while penalizing the provinces with the best outcomes. At the heart of the issue is the myth of fiscal capacity, the notion that some provinces are luckier and wealthier than others are and that they should share this wealth. The notion of accidental wealth, owing to natural resources more than to government policy, is not borne out by examples within Canada or internationally. The “Asian tigers,” for example, are limited in terms of their raw resources, and they developed their wealth by adding value, exporting knowledge, and staying out of the way of progress. Venezuela and the Congo, on the other hand, have abundant natural resources, but they have a low standard of living and, they failed to realize their potential.

Within Canada, similar trends are clear. British Columbia and Alberta are rich in raw resources. During the 1990s, though, redistribution and taxation caused real income in British Columbia to decline, while Alberta’s commitment to paring government to basics resulted in tax cuts, soaring incomes, and a booming economy. Transfer payments provide the worst possible incentives by redirecting funds away from the provinces that generate them and by subsidizing the inefficiencies that create the have-not provinces in the first place. If all provinces are to be as prosperous as Alberta, they must change direction and enact the policies that led to Alberta’s success. Forcing Albertans to pay for bad policy in Quebec and Manitoba will make all provinces poorer.

Canadians value fairness and equality, and much domestic policy takes as its central premise the philosophy that government regulation protects the poorest and most needy. With regard to a need as basic as food, though, the status quo actually does the opposite and drives up the cost of living for those least able to afford it. Subsidies and marketing boards, created to strengthen Canadian agriculture and its beneficiaries, are limiting supply, subsidizing poor practices, and, worst of all, driving up costs. The average Canadian spends an extra $300 plus on groceries every year because of the hidden costs of these policies. To a well-off Toronto bureaucrat or pro-monopoly politician, this is trivial. To a single parent supporting three children, an extra $1,200 a year for basic food needs is a significant amount.

Milke sees a solution on the horizon in the form of growing discontent with the federal government on the part of Alberta, Ontario, British Columbia, and Quebec. These four provinces represent 86% of Canada’s population; and on any one issue, three of the four represent more than half of the country’s population. As provincial governments lose patience with Ottawa, they will become more likely to work together to decentralize power and taxation. All four have much to gain by pressuring the federal government. Quebec will continue to clamour for separation, while absorbing ever increasing transfers from successful provinces. Ontario loses $2,725 per capita in annual transfers and will not accept this indefinitely. British Columbia and Alberta, also losers in the equalization game, share a growing impatience with Ottawa’s eastward tilt.

With a Conservative prime minister from Alberta, provincial discontent may finally succeed in bringing about change. A Nation of Serfs? does a commendable job of demonstrating why this change is needed. Readers seeking to understand the problems with Canadian political culture will find this to be an illuminating and accessible read, while those who already share Milke’s dissatisfaction will find a concise and well-argued summary of the case for a freer Canada.