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Seven: Dealer's Choice

The lack of a balanced economic growth policy in Ottawa has aggravated regional alienation at a time when Canada’s national unity is under severe strain for constitutional reasons. This chapter is accordingly about national unity from a less-commonly heard perspective: that of our regions and our development policies which have a negative impact on national cohesion in Outer Canada. An urgent priority in Ottawa should be to reverse present federal government trends which seem designed to reinforce the hinterland status of Outer Canadians.

Outer Canadians are well aware of the harm done to our districts, towns and cities by many Ottawa policies and by Ottawa indifference. For example, we are aware that numerous federal initiatives, including departmental and Crown corporation procurements, have encouraged considerable overcrowding especially since 1985 within viewing distance of Toronto’s CN Tower. The results have included traffic congestion, skyrocketing home prices and rents, increased air pollution, crime, irritability and skill shortages. Many parts of Outer Canada have experienced chronic high unemployment and out-migration during the same period. Quite understandably, Metropolitan Toronto became the goal of many of those hurt by these circumstances and looking for a job.

Few Outer Canadians think Ottawa’s exorbitant interest rates and expensive Canadian dollar are motivated by real concern for our problems. When the Governor of the Bank of Canada and the Finance Minister Stolidly defend an interest rate level five percentage points above that in the United States, they maintain it is indispensable to combat inflation. In reality, they are alarmed by price-hikes in Toronto. They should recognize that Ottawa’s procurement practices, its research funding and many other of its policies are aggravating the trend. Yet, Michael Wilson implies that increasing bankruptcies across Canada are necessary to wring inflation out of the economy -- as if they contribute to it significantly.

High interest rates cannot effectively fight inflation without first bringing on a serious recession. Speaking to several groups of students and business people this year in Edmonton, I couldn’t find a single individual who thought otherwise. We Outer Canadians know from past experience that the recession John Crow and Michael Wilson are creating with corrosive interest rates will have the most serious and lasting impact on the outer eight provinces and the North. We also know that a major reason for the present interest rate level is an attempt to keep the Canadian dollar at a level acceptable to foreign holders of Canadian government bonds, mostly Japanese and American institutional investors.

Job creation across the country remains in large measure a function of federal government spending activities and legislation. A more inclusive national vision would pursue balanced economic, social and cultural growth as a major national goal. This would have important short and long term positive effects on the regions.

In a host of ways, successive national governments have perpetuated economic disparities, uneven growth and unequal career opportunities for Canadians on the basis of their province of residence. The 1879 National Policy of John A. Macdonald planted manufacturing firmly in the core of Ontario and Québec. Subsequently, Ottawa’s transportation, banking, communications and other policies enhanced the dominant roles of Toronto and Montréal. The AutoPact provided an enormous stimulant to a manufacturing sector located almost exclusively within southern Ontario and metropolitan Québec. The National Energy Program of 1980 was intended to weaken western private and provincial government dominance over one of the few sectors that were not yet dominated by Inner Canadians.

Regional differences are key facts of Canadian federalism. It is federalism that ensures that our diversity can be maintained in Québec, as well as in nine other provinces and two territories. As disparities among various provinces persist and grow, a number of economists and political scientists have become concerned, however, with the question of "who gets what" and "whom does the political system serve."

The benefits of any federal union are much more subtle and intangible than can be represented by any arithmetic on dollars won or lost. The advantage of belonging to a much envied country, which unites French and English or Atlantic and Western Canadians, should never be translated into money alone. Equally, no price tag or penalty should be placed on one’s loyalty to a province or region. Much of the time, the evaluation of benefits and costs of Confederation to a region or province is a matter of opinion. perception and evaluation in the eyes of the beholder. The perceived distribution of benefits might have little to do with dollar transfers or material gains, but, more importantly, be seen in the sphere of attitudes and subjective or symbolic injustices. The long-held Outer Canadian symbol of the milk cow of Confederation -- with its head grazing in the pastures of the West, its teats being milked in Central Canada, and the hind end dumping on the Maritimes -- originates from a subjectively perceived popular analysis of the benefits and costs of Confederation. In large part, these perceptions are based on economic matters and the feelings of under-representation for residents of most provinces in national decision-making.

John Hotson, executive director of the Committee for Economic and Monetary Reform, offers this metaphor to characterize the Canadian economy: "Canada is like a ten-room house with one hot room and nine cold ones. People are crowding into the hot room where they can find a job, but not a place to live, causing real estate prices to explode." Residents of the "cold rooms" are likely to agree with Hotson when he says that more imaginative and fairer national policies would spread the heat so that more Canadians could find jobs from Newfoundland to Vancouver Island.

According to some preliminary Statistics Canada data on provincial economic performance released in mid-1990, Ontario and Québec accounted for almost two-thirds of Canada’s gross domestic product at market prices in 1989 (Fig. 5). Although British Columbia had the highest growth rate in the country during 1989, it did not alter the basic trend of the l980s -- the continuing dominance of Central Canada in the national economy. It was beyond any doubt another decade for Inner Canada.

How the Provinces Performed
1989

Figure 5

Other national governments have been much more successful in stimulating balanced economic growth. Within the United States, Florida led all fifty states in growth during 1989. Orlando, in central Florida, with approximately a million residents, ranked fourth nationally during the same year in attracting new business facilities and expansions of existing ones. The top five metropolitan areas in new plants and expansions --Dallas, Portland, Atlanta, Orlando and Los Angeles -- are located in five different American states. The best-performing ten states under the same criteria were Florida, California, Alabama, North Carolina, Texas, Ohio, Pennsylvania, New York, Virginia and Georgia. Not all regions are represented in this group, but balanced regional growth clearly means far more in the United States than in Canada.

Australia, a vast land, sparsely settled with just over 15 million inhabitants, is often portrayed as a "region-less" nation. From data assembled by the Australian Bureau of Industry Economics in the early 1980s, it is evident that disparities in unemployment by state and regional income differentials in Australia were smaller than in the United Kingdom, Canada or the United States. Regional problems certainly exist in Australia and policies designed to divert population and economic activity away from the major centres have not worked as expected. Nonetheless, regional fairness is constantly on the agenda of Australian cabinets.

In Australia, the national government has major fiscal functions such as revenue raising, but state governments do undertake much of the spending. As with Canadian provinces, they exercise a wide range of powers affecting economic activity.

Section 99 of the Australian constitution orders the federal government to favour no state, or any part of one, over another state or its components. Another section bars favouritism on tax matters either between states or within regions of them.

After World War II, tax concessions were offered to the Australian mining industry, which benefits non-metropolitan areas. Concessions similarly were extended to petroleum exploration and development companies which had a positive impact on remote areas such as northwestern Australia. Personal income tax concessions are also available for inhabitants of remote regions. These areas have received special assistance when their industries have encountered difficulties. Various forms of aid are regularly offered to primary industries in rural areas for product research and development, restructuring and marketing. Finally, special projects play arole in decentralizing policies: irrigation schemes, railway and wood construction, the placement of military and educational institutions, and the development of the national capital, Canberra, away from metropolitan Australia.

In Japan during the 1989-90 fiscal year, the national government allocated 300 billion yen for grants known as the "furusatososei," or creation of home towns, to revitalize regional economies. Three thousand cities, towns and villages, including a tiny island village 367 kilometres off the coast of Tokyo with only 210 residents, will receive a special grant from the government up to an amount of one hundred million yen (approximately $900,000 Can.). Such communities will spend it to attract young people to "come home." The Japanese ministry responsible for carrying out this project, while conceding that 100 million yen will not be enough to revitalize all regions, stresses that the real objective of the project is to get people thinking about how to revitalize their towns and regional economies. Political scientists in Japan say the "furusato program" will have a positive effect in boosting morale in many regional communities across Japan by sending a message that the government is henceforth watching Out for "country folk." In Canada, efforts to create such a "caring image" in the regions have rarely been a priority of our national governments.

Is it any wonder that the perception of Ottawa indifference and remoteness persists among Outer Canadians? The government’s tendency to abandon the regions is contrary to the spirit of the Japanese "furusato program." Instead of attracting people and keeping them employed in small communities, it favours the already overpopulated metropolitan centres and lets the small communities die.

From Ottawa’s Department of Regional and Industrial Expansion (DRIE) figures for 1986-87 and 1987-88, it is obvious that our largest, most diversified and industrialized provinces, Québec and Ontario, received the major portion of regional grants: 60 per cent of the total in 1986-87 for both of the provinces, and 71.5 per cent during 1987-88. A closer look at regional development funds reveals astonishingly that they tend to benefit major urban centres, not small remote and underdeveloped communities as anyone would expect. "For one thing, they appear to have ended up favouring the major urban centres where much of the development would probably have occurred in any case; for another, it was costly," said the 1989 Report by Canada Employment and Immigration’s Advisory Council.

In May, 1990, the Mulroney government announced with much fanfare that $584 million spread over five years would be spent to revive the fishery, diversify the Atlantic economy and create more employment in the troubled Atlantic region. Whether the program, still short on details, is going to accomplish all these goals in four severely depressed provinces, the amount of the package was low relative to federal regional development funds going to Québec and Ontario, our two provinces with the most diversified economies. For example, during 1988-89 alone, these two large provinces received fully $633.9 million in grants and contributions from DRIE, now "the lead department for regional economic development in Ontario and Québec," in the wording of the 1988-89 annual report of DRIE and the new Department of Industry, Science and Technology.

Economic development in the West and Atlantic Canada is in future to be the sole responsibility of the Western Diversification Department, with a budget of $1.2 billion spread over seven years, and the Atlantic Canada Opportunities Agency, with $1.05 billion spread over seven years. Their budgets, though considerable and much needed in both regions of Outer Canada, do not compare favourably with the financial help Ottawa provides each year to Ontario and Québec filtered through a host of different programs, departments and subsidiaries. In fact, these funds, including the half a billion dollars provided for Atlantic programs over five years, contrast with the $1.3 billion the Etobicoke North riding in the greater Toronto area received in contracts awarded by the federal Supply and Services Department during 1987 alone. If the eight outer provinces received a fair share of the goods and services bought each year by the federal departments and Ottawa’s crown corporations, special economic development programs would be unnecessary.

In their editorial comments on the government’s aid program for Atlantic Canadians, two Inner Canada newspapers, in effect, invited Ottawa policy makers to treat them as fodder for Toronto’s labour market. The Ottawa Sun considered that "a good many more Maritimers and Newfoundlanders should be thinking of relocating in Central Canada where, right now, there’s a shortage of labour." In like manner, The Globe and Mail observed: "The government cannot continue to support indefinitely Canadians in communities with little hope of employment." Both newspapers would apparently prefer every Atlantic Canadian to resettle in the Toronto area. Do they really want twenty-six million Canadians to live in Metropolitan Toronto?

While national governments in other countries attempt to spread economic activity more evenly, Outer Canadians see the historic pattern of power and wealth concentration in Central Canada flourish. Personal income per resident for Canada as a whole averaged about $18,070 in 1987, for example, but it was only $12,400 in Newfoundland (Fig. 6). The highest provincial income in the land was not far off twice the lowest.

Personal Income Per Capita by Province
1987

Figure 6

Across Canada, during 1989 and into 1990, there were 144 businesses started which already employ more than fifty individuals. Eighty-five of them -- sixty per cent -- are located in Ontario and Québec; 52 are in Western Canada; only seven are in the four Atlantic provinces. None is in the North. According to the Financial Post’s 1989 ranking by sales or operating revenues, 365 of our largest 500 companies -- 73 per cent --have their head offices in Ontario or Québec (Fig. 7). An even greater percentage of the largest financial institutions -- four-fifths -- are based in Ontario and Québec, leaving eighteen percent for the West and a pitiful two per cent for Atlantic Canada. Toronto itself houses the head offices of forty-five of our large financial businesses, with nineteen in Montréal, three in Québec City, seven in Vancouver and two in Edmonton. The head offices of all six of the major chartered banks are located in Toronto or Montréal. Such head office concentration might be understandable for London or Paris in the case of relatively small Britain or France. In the United States it does not exist to nearly the same extent.

Head Offices of Top 500 Companies

Figure 7

A strong argument can be made that our private sector must be free to locate corporate and head offices where it chooses and to expand where it is most cost efficient to do so. On the other hand, when Northern Telecom expanded to the United States its senior management was told informally that to be considered a responsible national company it must locate manufacturing facilities in different regions of the country. Northern Telecom complied, building its American manufacturing facilities in five regions. To its credit, it has done so in Canada as well. American-based companies, involved in manufacturing in various parts of the United States as responsible corporate citizens at home, should spread their Canadian subsidiaries across Canada, instead of concentrating them in Canada’s Main Street.

During 1988, of the fifty fastest growing Canadian companies, two-thirds were Ontario or Québec companies. Only fifteen were in the West and only two called an Atlantic province home. Even more significant perhaps are the figures for the so-called companies of tomorrow. They include the up and coming along with some which have slipped out of the 500 largest, such as B.G. Checo International of Montréal, dealing in electronics, and Simplot Canada of Brandon, a fertilizer company. Only three per cent of these businesses now have their head offices in Atlantic Canada, twenty-four per cent in the West, and seventy-three per cent are in Ontario or Québec (Fig. 8).

"100 Companies of Tomorrow"-Head Offices
By Region

Figure 8

Despite some deficit reducing measures undertaken by the Mulroney government, Ottawa handouts to large businesses continue. Hundreds of private-sector companies, some very prosperous, receive billions in taxpayers’ money each year as unnecessary subsidies. It is estimated that Ottawa today spends $8 billion annually on subsidies to promote exports, industrial expansion, research and development and related activities. This figure does not include a host of very large federal tax breaks and loan guarantees. For example, among eight companies from the 1988 list of beneficiaries, seven were headquartered in Ontario or Québec and one in Calgary. One of them, Noranda, with a net income of $603 million, received approximately $22 million in grants from federal taxpayers.

Between September, 1984, when the election of the first Mulroney government was elected and January of 1990, approximately 1.6 million jobs were created across Canada, virtually all by the private sector (Fig. 9).

Job Creation Statistics
Sept. 1984 to Jan. 1990

Figure 9

Approximately 8 per cent of the jobs created were in Atlantic Canada, 24 per cent were in Western Canada, and 65 per cent were in Ontario and Québec. As of December 1989, almost 80 per cent of the manufacturing jobs were in Ontario and Québec (Fig. 10). A common excuse from manufacturers in southern Ontario as to why they do less and less manufacturing in Outer Canada is that it lacks population from which employees might be recruited. However, a spokesman for one manufacturing company told me recently that they face on-going difficulty in hiring enough people for their three plants located within Metropolitan Toronto.

Manufacturing Sector Employment
December 1989

Figure 10

Regional Unemployment

The opposite side of this coin is the regional breakdown of unemployment rates. The Economic Council of Canada noted in its 1977 study of regional disparities that "Unemployment in some areas of Canada continues to be a national disgrace." Today, thirteen years later, the situation has not improved and in some locations has actually grown worse (Fig. 11).

Unemployment Rates
By Province
April 1990

Figure 11

The difference among regions in unemployment rates of as much as eighteen percentage points shows that our recovery since the 1981 recession has been the most uneven of modem times. For example, in March 1990, the average unemployment rate across Canada was 7.2 per cent. In the same month, the unemployment rate in the Gaspé region of Québec was 23.1 per cent; in the Port-aux-Basques area of Newfoundland, 21.3 per cent; and in the New Brunswick counties of Northumberland, Restigouche and Gloucester, 20.6 per cent, while in the Toronto and Ottawa-Carleton regions the rate was 4.8 per cent.

The spring 1990 issue of Statistics Canada’s Canadian Social Trends carried an article by David Gower, a Statistics Canada analyst, on regional unemployment in Canada. He concluded his analysis of the 1985-88 regional unemployment rates by saying that regional inequality in unemployment is growing, and the gap between the areas of high and low rates is widening. Statistics Canada figures reveal that almost all of our ten areas with the highest unemployment rates during 1988 were in the Atlantic provinces and peripheral parts of Québec. Non-metropolitan Newfoundland experienced the highest unemployment rate of any region in Canada in recent years: 19.2 per cent during 1988. Two hinterland regions in Québec, the Lower St. Lawrence and Lac St-Jean-Cote Nord, had the second and third highest unemployment rates in the country during 1988 with 13.8 per cent and 13.1 per cent respectively.

Gower concludes that in general, between 1985 and 1988, unemployment rates decreased about forty per cent in our ten highest employment regions, compared with a twenty per cent decline in the high unemployment ones. In the 1988 survey of forty areas across Canada, every one of the 10 areas with lowest unemployment rates came from Ontario with nine of those ten in southern Ontario.

As the Economic Council of Canada noted in its 1990 study of our national service sector, Good Jobs, Bad Jobs, "virtually all recent employment growth has involved either highly skilled, well compensated and secure jobs or unstable and relatively poorly paid jobs." By this, it meant that a computer programmer in a head office has a good service job and a bright future whereas a postal worker in a Newfoundland outpost has a meagre income and doubtful prospects. The growing division of service employment across Canada into "good-job" and "bad-job" sectors during the 1980s and 1990s will increase disparities between our regions because good jobs tend to be concentrated in large cities -- the dominant centres of service growth -- which are disproportionately located in the more developed communities within Ontario.

How are Ottawa’s myriad agencies, departments and crown corporations doing in an age of instant communications in providing regional leadership to our private sector? Only five of forty of our largest or best-known national crown corporations have their head offices outside Inner Canada. Not one of the five is in Atlantic Canada. The five in Western and Northern Canada are: Canadian Wheat Board -- Winnipeg; Cameco (formerly Eldorado Nuclear) -- Saskatchewan; NWT Power Commission -- Yellowknife; Petro-Canada -- Calgary; and Canada Harbour Place Corporation -- Vancouver. The other thirty-five are all located in either Ottawa or Montréal. Some seem especially out of place there given the nature of their activities and the locale of their clientele. Why, for example, do the St. Lawrence Seaway Authority, Farm Credit Corporation, Canada Ports Corporation, and Canadian Dairy Commission need to be in Ottawa-Hull?

Newcomers

In the crucial area of immigration as a stimulus to local economies, congested Inner Canada continues to be the disproportionately dominant destination of most newcomers to Canada. There are also concerns in Outer Canada that the proposed Ottawa-Québec City agreement on immigration in the wake of the collapse of the Meech Lake accord will mean in practice that Québec must receive twenty-five to thirty per cent of all future immigrants to maintain its present share of our population. This might well translate into a reality that nine other provinces are held back in the numbers of newcomers they can have in order to maintain this population ratio if Québec has difficulty in attracting its allotted share in a given year.

Between 1946 and 1986, approximately 3.5 million immigrants arrived in Canada. Nearly two million of them settled in Ontario. During 1988, the largest share of all categories of immigrants understandably went to booming Ontario: fifty-six per cent of the family class, fifty-five per cent of the independents, and fifty-four per cent of refugees and designated classes of newcomers. In the same year, 83,000 persons, or fifty-two per cent of the total number of immigrants, settled in three cities: Toronto, Montréal and Ottawa-Hull.

During 1988, approximately 4,000 business immigrants arrived in Canada (Fig. 12), with two-thirds going to Ontario and Québec, eight per cent to the Prairies, twenty-five per cent to British Columbia and the Yukon, and only two per cent locating in Atlantic Canada. It is estimated that entrepreneurs and self-employed individuals arriving during that year brought with them approximately $3.4 billion available for investment. Ontario and Québec received about half of this total. In Outer Canada, in fairness, British Columbia benefited from about $1.3 billion in new investments from immigrants.

Destinations of Business Immigrants
1988

Figure 12

The "investor" group of immigration categories, which allows in people with $250,000 or more in cash, does not require that the investors live in the same province as their investment. A recent policy change authorizes such newcomers to invest $250,000 in Alberta, Saskatchewan, Manitoba, the Yukon, the Northwest Territories and the Atlantic provinces. Immigration policy-makers in Ottawa are in short so unfamiliar with business opportunities across Outer Canada that they actually believe that the specified areas could not attract new investment if the amount of $350,000 necessary for Ontario, Québec and British Columbia was maintained for the "boondocks."

Ottawa Spending

In advanced industrial democracies, government purchasing policy has long been recognized as an important instrument of economic policy in advanced industrial democracies. In Canada, Ottawa’s regional procurement favouritism generates on-going federal-provincial conflict. Outer Canada governments claim with good reason that federal purchasing policies actively contribute to the growing concentration of industry in Ontario and Québec. "They are correct said Donald Savoie, an authority on regional development, during 1986. "About eighty percent of all federal contracts are placed with firms in Central Canada." Professor Allan Tupper of the University of Alberta, in his Public Money in the Private Sector: Industrial Assistance Policy and Canadian Federalism, wrote in 1982 that Ottawa’s Department of Supply and Services "seems rather resigned to the continuing pre-eminence of centrally-located firms" and concluded "Ottawa does not appear to have consistently employed purchasing policy as a regional development tool." There seems to be little sign of improvement since that time.

Always a factor in Canadian political decisions, the "numbers is politics" reasoning clearly prevails in the present pattern of Ottawa spending. This is at any rate how it is perceived by some provincial governments. They tend to interpret every discrepancy in the allocation of spending as Ottawa’s regional bias. Frustrated with their recent experience in Confederation, they draw balance sheets showing they are losers in dealings with the federal government. If this federal government were to adopt regional criteria in allocating its overall procurement of goods and services, its large role as employer and purchaser would make it an efficient instrument to achieve greater regional fairness.

Government facilities, varying from armed forces bases to post offices, are scattered across the country. Where such facilities are built, where Ottawa turns for its supplies, where it hires and employs people, and where it establishes and maintains defence bases has important effects on the regional distribution of benefits. Its practices here also create an impression of regional fairness or unfairness. During the fiscal year 1987-88, total federal government spending on goods and services amounted to $9.6 billion (Fig. 13a and 13b). By total tax dollars spent, Québec and Ontario received 51 per cent of the government’s purchases. The four western provinces got 10.9 per cent. Atlantic Canada’s total of 35.2 per cent was much higher than normal because of the award of the patrol frigate contract to the Saint John dockyard. For the 1986-87 fiscal year, the numbers were even more distressing: Central Canada --76 per cent, Western provinces -- 11.5 per cent, and Atlantic Canada -- 7 per cent.

Federal Government Procurement
By Province
1987-1988

Figure 13A

Federal Government Procurement
By Region
1988-1989

Figure 13B

Individual federal government departments and major federal crown corporations often display the same dreary pattern as far as their expenditures on goods and services are concerned. The chart "Spending on Goods and Services" graphically shows the procurement practices of some selected federal government departments and agencies (Fig. 14)

For example, Ottawa’s Public Works ministry bought $106 million in goods and services in 1988-89. Eighty-three percent was obtained through its offices in Ontario and Québec. During the same year, Labour Canada bought an astonishing ninety-three percent of its goods and services within Ontario and Québec, including the National Capital Region. The Canada Council, which specifically denies any role for regional justice in its cultural mandate, purchases less than one per cent of goods and services beyond Toronto-Ottawa-Montréal. During 1988-89, the Ottawa-based International Development Research Centre placed orders with suppliers in eighteen different countries, including Ethiopia, Botswana, Sri Lanka and Panama. At home, however, during the same year a breathtaking ninety-nine per cent of its orders were awarded to suppliers in Ontario and Québec.

Spending on Goods and Services
1988-1989

Figure 14

One model of what national agencies might be, a clear exception to the norm, is the Federal Business Development Bank (FBDB). Eighty-five per cent of the FBDB regional and branch office supply expenses are made outside of the Toronto-Ottawa-Montréal triangle. It currently employs 1,250 persons across Canada: fifty per cent of the total number in Central Canada, thirty-six per cent in the West and fourteen per cent in Atlantic Canada. On a provincial basis, as of March 1988, the FBDB’s loan portfolio included over 7,400 customers in Central Canada; 6,100 in Western Canada and 2,175 in the Atlantic provinces. This is a federal agency attempting to enfranchise every part of the country.

Defence Dollars

It is occasionally argued that defence spending should not be considered a regional development tool because of efficiency and vaguely-defined security considerations. Other NATO countries, however, have been more successful in stimulating local economic development in stagnant areas through the awarding of defence contracts and the location of bases. In Britain, where the southeast is already overcrowded with military research laboratories and facilities, there is growing pressure to move such facilities and service personnel to other regions of the country. Michael Heseltine, a possible Conservative successor to Margaret Thatcher, in his book, The Challenge of Europe, stresses the need to give the whole of the country a fair share of wealth-creating potential. Tim Sainsbury, the junior British Defence Minister responsible for procurement, set out the Thatcher government’s position when he announced the transfer of 1,500 jobs from London to Teesside, in northeast England.

In Canada, as past statistics indicate and the April, 1989 federal budget reinforces, the trend is to concentrate defence-related activities within Inner Canada. A determined federal government as the principal customer for Canada’s munitions industry could have major influence on where that industry is located. Despite its dependence on Ottawa for its so-called modernization grants as well, more than ninety per cent of the 3,000 jobs in that industry are within Ontario and Québec. According to Supply and Services unofficial departmental statistics for the period of April 1988 to February 1990, Central Canada received ninety per cent of the value of munitions contracts awarded ($333 million) (Fig. 15). The four western provinces received only eight per cent of the contracts, and the Atlantic provinces 1.3 per cent.

Defence-generated spending in the aircraft and parts industry also benefits Ontario and Québec virtually exclusively. For example, during the 1982-83 fiscal year, it provided Ontario and Québec with 75 per cent of available jobs. Offset contracts associated with our two major aircraft purchases, the CP-140 and CF-l8, also go mostly to Ontario and Québec.

Under Ottawa’s Defence Industry Productivity Program (DIPP), which is designed to assist high technology firms in the defence sector, ninety per cent of the payments in dollar value went to companies in Québec and Ontario during the fiscal year 1987-88. No-one in PEI, New Brunswick, Saskatchewan, Yukon or the NWT received a thin dime of this tax-payer-funded work. During the 1988-89 fiscal year, Québeckers and Ontarians received ninety-five per cent ($213.3 million) of the money available in the program. The four western provinces got four per cent and Atlantic Canada a mere $400,000.

Munitions Contracts
By Region
Apr. 17, 1988-Feb. 6, 1990

Figure 15

In reply to my letter of inquiry about the DIPP’s blatant regional unfairness, H.G. Rogers, the Deputy Minister of Ottawa’s Department of Industry, Science and Technology, conceded in an early 1990 letter: "As you correctly stated, the majority of the money is spent in Québec and Ontario ... DIPP assistance is forthcoming in response to industry investment intentions. As most of the industry, and hence most of the new investment by industry is located in Central Canada, the majority of DIPP funds are also expended there." In other words, the ministry provides no guidelines to encourage using tax money paid by all Canadians to achieve even the tiniest degree of regional fairness on defence matters.

Even the Toronto Globe and Mail admitted editorially that "DIPP is really another regional development subsidy spreading federal money mostly in Québec and Ontario. Almost all of these companies can obtain financing through normal commercial means." Those receiving the funds are well-known names in Canada’s aerospace, defence and high-technology industries, such as Spar Aerospace Ltd., Canadian Marconi Ltd., CAE Electronics Ltd. and Canadian Astronautics Ltd., but also privatized crown corporations such as Canadair Ltd. in Montréal, now owned by Bombardier, and De Havilland Aircraft of Canada in Toronto, a subsidiary today of Boeing. Bombardier received a $43 million loan to develop a regional passenger jet and De Havilland, $50 million to produce a series of its Dash 8 commuter plane.

According to the Statistical Abstract of the United States 1989, the American federal government in contrast allocates defence contracts in all fifty states. These cover military awards for supplies, services and construction. The total budget for 1987 was more than $131 billion. Of this total, fifteen eastern states received approximately thirty-four per cent of the contract funds; seventeen western states received approximately twenty-seven per cent; and eighteen central states received a third. Seventy-two per cent of the fifty states each received over half a billion dollars in defence contracts, and fifty-four per cent of the states received over a billion dollars. The average appropriation for defence contracts in each state was $2.6 billion. In short, elementary regional justice was done for virtually every corner of the country. According to our own Department of National Defence statistics for the fiscal years 1985-86 and 1986-87, a breathtaking seventy-seven per cent and sixty-six per cent respectively of the dollar values of contracts were awarded in the Montréal-Ottawa-Toronto triangle. The department says it did not keep records of financial activities by specific urban areas before 1985.

Analysis of the 1988 Public Accounts list of contracts awarded by DND by a specific area of specialization shows a less than equal distribution of contracts in Canada’s regions. In 1987, for defence engineering services, Western Canadians received only eight per cent of the total allotted budget amount. In training and education, the Atlantic provinces received fourteen per cent of the contract but only 8.6 per cent of the funding by dollar amounts. For computer services, Central Canadians received no less than ninety-seven per cent of the budget. For scientific services, Central Canada received 96 per cent of the available contract funds.

The Department of National Defence study on its estimated spending in each federal constituency for the fiscal year 1988-89 did it little good in parts of Outer Canada. For its regular military and civilian staff then numbering 112,000 persons, only 8,400 were based in the three poorest provinces of Atlantic Canada. The cutbacks announced since then will reduce this number even further. The "have-not" Western provinces of Manitoba and Saskatchewan together included only 7,350 military personnel among their residents and these modest numbers will also shrink with the cutbacks at places like Portage La Prairie. In terms of defence spending on items other than salaries, the study is equally uninspiring from the standpoint of the hinterland. Atlantic Canada that year received about 17.3 per cent or some $793 million of such spending, but closer examination reveals that two-thirds of it went to Saint John for the frigate contract. Toronto’s Etobicoke North riding alone received almost $500 million in the same year. In the West, Saskatchewan received a pitiful $16 million.

Obviously, such patterns can be reversed only through a new and iron-willed government direction. New defence spending policies which focus development on our Western and Atlantic provinces will not only help their economies but will also stimulate migration to these areas, which in turn will stimulate spin-off economic activities. It will also strengthen national unity and the sense that Ottawa is for once acting like a national government. As demonstrated in the United States, government spending can generate development in isolated areas. It can also promote a common national direction and teamwork among Canadians everywhere.

Research and Development

Research and development (R & D) is usually defined as creative work undertaken on a systematic basis to increase the level of scientific and technical knowledge and the use of this knowledge in new applications. If, on the world scene, Canada in general and our outer regions in particular do not want to be again relegated to roles as hewers of wood and drawers of water in the coming century, our R & D activities need to be assessed carefully. Spending on R & D is an important indicator of the national effort to stimulate creative activity, and is directly linked to technological innovation and economic growth. As the federal government is one of the major funders of R & D in Canada, the level and the distribution of such expenditures shows where Ottawa is concentrating its development efforts.

Ottawa, Toronto and Montréal are the three major "nodes" of science and technology within Canada. For example, more than 25,000 Ottawa-Hull residents work in high-technology firms or government labs. A quarter of the 1987-88 federal budget for R & D was spent in the National Capital region alone. The Western provinces received twenty per cent of the $2.3 billion our federal government spent on research and development during 1987-88. Ontario got a little more than half; Québec approximately twenty per cent; and Atlantic Canada, eight per cent (Fig. 16). The Mulroney government is spending hundreds of thousands of public dollars to relocate the Space Agency from Ottawa to a community near Montréal, but declines to spend a greater share of Ottawa’s R & D money across Outer Canada.

Spending on Research and Development
Federal Government
1987-1988

Figure 16

Much of Central Canada’s dominance in research and development is because of the concentration of federal government scientific establishments in the region. In this regard, the recent decision by the Minister of Energy, Mines and Resources, Jake Epp, himself a Manitoban, to close a federal surface mining coal and oil sands laboratory at Devon, Alberta, the only such facility west of Ontario, is the opposite of regional justice, especially when his department already has three such labs in Ontario, one in Cape Breton and one more proposed for Québec.

Ottawa Mandarins

"There can be little doubt that Canada has been dominated economically since Confederation by Ontario and Québec and particularly by a relatively small group of people and companies located in Montréal and Toronto," concluded David Walker of the department of geography, University of Waterloo, when analyzing Canadian regional development policy in 1983.

A continuing conviction shared by Outer Canadians is that we are chronically under-represented in the public service of our country. Atlantic Canadians protested soon after Confederation about this; francophones have long complained that they are under-represented at more senior levels. Kenneth Kernaghan concluded in a 1978 study that middle levels of the pubic service were more representative of the country as a whole than were senior ones in terms of both birthplaces and geographical regions.

Two years later, Dominique Clift wrote that a disproportionate number of top officials were from Ontario. The journalist Jeffrey Simpson revealed during 1981 only one deputy minister and three of 198 assistant deputy ministers were Albertans. Roger Gibbins points out in his book, Regionalism: Territorial Politics in Canada and the United States, that as of 1982 provincial origin was not, in the mind of the Public Service Commission of Canada, a factor at all relevant to recruiting federal officials. By my own inquiry it has still not become one.

Toronto, Ottawa-Flu 11 and Montréal together contain almost half of the more than 200,000 federal employees. About one third of federal government employees live in the National Capital Region. In the United States, the equivalent figure for Washington, D.C. is only twelve per cent. The new national Liberal Leader, Jean Chrétien, revealed during the early 1980s that only one out of seven senior executives in the federal public service lived outside Ottawa-Hull. Chrétien also noted that as many as seventy per cent of senior government policy makers in Ottawa had little or no regional experience and that as many as half of them never worked outside Ottawa during their entire careers. There appears to be a clear consensus now among federal mandarins that there is no such thing as a parallel career for their colleagues "in the regions." Job classifications, salaries and a host of other factors make it clear to everyone that the best careers are ones which begin and end in Ottawa.

Data on the regional or provincial composition of federal officials are difficult to find because, unlike linguistic and gender data, they are rarely recorded. My own survey of the 220 most senior individuals in twenty-eight federal departments and agencies in mid-1989 indicated that only about ten per cent were born and educated in Western Canada. Four per cent were from Atlantic Canada in both education and birth. Senior executives who were both born in and educated in either Ontario or Québec hold seventy per cent of the highest posts. Eight per cent of the top job holders were born outside Canada, but all of them had received at least part of their education in Ontario or Québec. None of these high-achiever newcomers to Canada had completed any post-graduate education outside Inner Canada. None of the officials surveyed was born or educated in the Yukon or Northwest Territories. The remainder were persons born in Outer Canada who later either moved to Ontario or Québec or completed their education there.

The experience of a Manitoba-born friend seems relevant here. Applying in Winnipeg for a professional position in the public service several years ago, she was shown only a small number of those available in her own province even though she was willing to relocate. She moved to Ottawa and shortly afterwards applied to the Public Service Commission where the list of available positions seemed endless. She quickly had an interesting position in the capital. Is this justice for all or only for those who can afford to move without first having a job?

During 1989, there were eleven senior executives in the Prime Minister’s office (PMO), influential advisers in our system of unreformed executive democracy. My research that year showed that by location of birth and place of post-secondary education used to establish a criterion of regional origin the following breakdown applied to the PMO: of the eleven individuals, nine were both born and educated in Central Canada. The one person of the group who was born in the West was Don Mazankowski. There was no representation in the PMO from the North or from the Atlantic provinces. One, the Prime Minister himself, was educated at St. Francis-Xavier university in Nova Scotia.

The same basic regional composition of the PMO applied during 1989 to the twenty-five senior executives in the Privy Council Office. Of the twenty-five, all of whom were appointed with the exception of Don Mazankowski, sixty per cent were born in Ontario and Québec, and seventy-six per cent were educated there. In this group, who speaks for Outer Canada?

Information on the province of birth of employees in the management group is not readily available because selection in staffing is presumably based on merit and because candidates do not generally provide this kind of information. The provincial distribution of post-secondary degrees obtained may therefore serve as a rough indicator of the province of birth. Accordingly, as of December 1988, the regional breakdown of the overall management category of most but not all of the federal public service was as follows: Atlantic Canada -- 6.9 per cent, Central Canada-- 60.2 per cent, Western Canada -- 14.4 per cent.

Reform of the Senate is currently at the centre of the growing national debate on how to provide better representation for regional interests in the major institutions of our national government. However, our federal public service and its ability to respond to legitimate regional aspirations has been largely ignored. One of the reasons why, as Donald Savoie suggests, may be the fact that so few academics across Canada understand the workings of our Ottawa public service. In Savoie’s words: "Many people still cling to the belief that politicians set policies and public servants simply administer them and carry Out ministerial directives." In reality, appointed Ottawa officials play the key roles in shaping most policies and in the decision-making process. Having served as a parliamentary secretary to four different cabinet ministers, this is certainly my own conclusion. Often, ministers in the Commons question period and elsewhere only mouth policy phrases prepared by their ministry officials.

Major policy decisions are normally made at the middle and senior levels of departments -- often by an associate deputy minister for policy. Cabinet ministers are rarely in a position to have much influence on the first draft of a policy position paper or cabinet document. The aphorism in Ottawa, "who controls the first draft controls policy," carries considerable and probably increasing weight. Officials prepare the groundwork for the introduction of new policies and it is they who are, in practice, expected to reconcile regional interests while defining new programs and initiatives. It is therefore vital to look at the federal bureaucracy from a regional perspective in order to see who are the usually faceless personalities behind policies which affect Canadians in every corner of the country.

Our national government is a highly centralized organization with a disproportionate number of its key-decision makers originating from Inner Canada. The organizational capacity of our federal government to represent regional circumstances is both inadequate and showing very little improvement.

A new threat to regional balance among Ottawa mandarins, which Roger Gibbins and others have pointed out, has emerged from attempts to create a more linguistically balanced federal officialdom. During the 1970s and 1980s, the Public Service Commission designated numerous senior positions in many departments as mandatorily bilingual, thereby requiring persons filling them to have a relatively good command of both English and French. Over a decade, this was coupled with good on-the-job language training which allowed unilingual officials to learn the other official language. The reservoir of bilingual people in and around Ottawa today is now sufficiently large that unilinguals in either official language are less likely to be hired or, if hired conditionally, to hold their positions if they fail what I’m told by officials is an increasingly difficult periodic language examination. Applicants from parts of Atlantic Canada as well as Western and Northern Canada and Québec, where only one official language is normally used, therefore face a growing language obstacle to a career in Ottawa. I agree with Professor Gibbins that the federal public service is therefore likely to become in future even less representative of Canadians generally than it is now.

Regional Policy Impotence

It is usually at the level of national policy making that Outer Canadians lose to politically-powerful Inner Canada. Some recent deficit-reducing programs have demonstrated a disproportionately stronger negative impact on Outer Canada.

The North is facing some very real new hardships as the Mulroney government proceeds with cost-cutting measures in selected programs. The new mail rates for northern commercial shipping went into effect on November 13, 1989. The average increase in postal rates is roughly thirty per cent for the entire North. Some of the immediate effects of the increase will be at least $300 more on family grocery bills; children going without fresh fruit and vegetables and the possible return of an old Arctic enemy --scurvy; the soaring cost of shipping essentials such as medicine and spare parts and even rifle shells; the potential for local disaster if some villages have to stop bringing in fresh spring water and go back to their old polluted wells.

On October 27, 1989, the task force on tax benefits for northern and isolated areas reported to the Minister of Finance, recommending massive cutbacks to a program which until now has tried to address basic needs of Canadians who live in the north -- in short, insensitive measures by a government driven by the demands of its more vocal and influential southern business constituency.

The two most recent federal budgets, the VIA Rail cuts, and the goods and services tax, if analysed from a regional perspective, clearly hit parts of Outer Canada harder than Inner Canada.

For example, Atlantic Canadians, who were the largest per capita users of VIA Rail services, suffered most from the recent cutbacks. With ninety-one per cent cuts of the sixty-six weekly return trips in the Maritimes, only six are left: two tri-weekly long-haul trains. Fully sixty-three percent of the VIA staff in Atlantic Canada were cut and the century-old regional headquarters in Moncton was closed. Overall, the cutbacks eliminated over three-fourths of the intra-Maritimes routes and reduced the frequency of all others by over fifty per cent. "Does Ottawa think Canada ends in Montréal?" asked John Pearce, the president of Transport 2000 Atlantic Branch, during an address to a rally on Parliament Hill opposing the cuts. He went on to ask about the disappearance of Prince Edward Island’s bus service, and the end of all VIA trains to Cape Breton and connections to Newfoundland. The answers to his questions are suggested in the title of this chapter.

The number of seats offered by VIA Rail in the West was cut by 80 per cent. It was impossible to book a cross-Canada sleeper during the next six months, observed Darrell Richards, Transport 2000 national president. He also commented on a bizarre new VIA policy that bans the sale of tickets between Edmonton and Jasper within three days of departure-- a move to limit the number of train-travelling Albertans to free more seats for bigger-dollar transcontinental passengers. The new restriction also affects passengers travelling on the Canadian train on two other stretches: between Capreol and Foleyet in Northern Ontario, and between Farlane, Ontario and Winnipeg. According to Alberta government estimates, $1.2 billion was injected into the Canadian economy by tourists and travellers on the transcontinentals operated in 1989. Reducing their capacity by eighty per cent is expected to eliminate about $900 million in badly needed economic activity.

Some of the 1989 budget measures have a major impact on rural communities across the country. Dismantling VIA Rail was felt hardest in small communities which lost one of their few major transportation links. The Canadian Forces bases to be closed were not in urban areas but in such communities as Summerside, Prince Edward Island; Mont Apica, Québec; Sydney, Nova Scotia; Portage La Prairie, Manitoba; and Port Hardy, British Columbia. As a cost-reducing measure, Canada Post is closing 1,500 rural post offices. Unlike urban centres, these smaller communities do not have other sources of economic development, and the losses in jobs and local business are unlikely to be absorbed easily by vulnerable local economies. Large cuts planned for the crop-insurance and regional development programs also target rural communities whose resources supplied Central Canada’s manufacturing needs and now often need coherent development assistance urgently. "Ottawa is laying siege to rural life in Canada," commented Gerald Hodge of Simon Fraser University.

In a historical perspective, the natural and people resources of rural communities were indispensable; they still are in building a sprawling urban Canada. It is a matter of deep national injustice to continue with policies which hurt the most vulnerable and fragile economies of rural Canada.

The recent changes to unemployment insurance benefits under Bill C21, passed by the House of Commons, have been widely seen as abandoning our most hard-pressed regions. The majority of witnesses who appeared before the Special Committee of the Senate on the bill shared an opinion expressed by Earl McCurdy of the Fishermen, Food and Allied Workers union, that the legislation is "… an attack on small communities; it is an attack on underdeveloped areas; and it is an attack on the basic decent foundations of our country. Bill C-21 is a classic case of blaming the victim." Under proposed changes, the claimants in a region such as St. John’s, Newfoundland, with an unemployment rate of 12.4 percent, would lose up to eleven weeks of benefits and would require three additional weeks of work to qualify for benefits. The analysis of the proposed benefit structure shows, the Senate Committee says, that the maximum duration of benefit entitlement would be reduced in the regions with high unemployment rates. For example, claimants in Central Nova Scotia, Hull, Sudbury, Northern Ontario, Southern Manitoba, Regina and the upper Fraser Valley would lose up to thirteen weeks of benefits. Some of these places have an unemployment rate higher than ten percent. Claimants in Halifax, Calgary and Vancouver would lose up to twelve weeks of benefits.

One of the anomalies of the change in the duration of benefits, the senators say in their final report, is that regions such as St. John’s, with 12.4 per cent unemployment, Montréal with 8.5 per cent and Northern Alberta with 9.3 percent would all lose up to eleven weeks of benefits, while three regions with unemployment rates below four per cent, Toronto, Oshawa, and London, would lose a maximum of only three weeks of benefits. "The only other regions where the maximum loss would be limited to three weeks would be those with an unemployment rate in excess of sixteen per cent," noted the Senate report.

It is also our smallest and poorest provinces that might have lost in the decentralization provided for by the opting out clause in the Meech Lake agreement. In a looser Confederation, if larger provinces had opted out to run their own programs, the federal government might well not have been able to afford national programs, including hospital and medical care, which Manitoba, New Brunswick and Newfoundland could not finance themselves.

All in all, the Mulroney government is seen virtually everywhere throughout Outer Canada as having abandoned peripheral Canadians on a host of issues. In the 1988 national election, it lost most of its Atlantic MPs, all of its Northern ones and some of its Western ones. More than ever, Brian Mulroney is perceived as a prime minister of, by and for some Inner Canadians alone.