The Cata­lans of Al­berta

National Post (Latest Edition) - - COMMENT - Jack M. Mintz Jack Mintz is the Pres­i­dent’s Fel­low at the Univer­sity of Cal­gary School of Pub­lic Pol­icy.

It was not at all help­ful that the less-than-af­fa­ble Mon­treal mayor, De­nis Coderre, de­clared it a “vic­tory for Canada” when Tran­sCanada with­drew its li­cence ap­pli­ca­tion for En­ergy East, a pipe­line project that ac­tu­ally would have pro­vided mar­ket-di­ver­si­fi­ca­tion ben­e­fits to t he na­tional econ­omy. It would be no dif­fer­ent than if the mayor of, say, Win­nipeg — home to a Boe­ing plant — de­clared it a Cana­dian vic­tory af­ter the U. S. Com­merce Depart­ment slapped on two im­port du­ties on Quebec’s heav­ily sub­si­dized Bom­bardier planes.

Coderre’s in­sen­si­tive com­ment re­minds many Western Cana­di­ans of their own past griev­ances. It was Prime Min­is­ter Justin Trudeau’s fa­ther who, with the 1980 Na­tional En­ergy Pro­gram, im­posed a breath­tak­ingly un­fair wealth trans­fer from western prov­inces to Cen­tral Canada. Pierre Trudeau had slapped ex­port taxes on Al­berta oil ex­ports to the U. S. to sub­si­dize en­ergy im­ports for East­ern Cana­di­ans. Mar­itimers, On­tar­i­ans and Que­be­cers got cheaper gaso­line and heat paid for by West­ern­ers. Ottawa’s bla­tant prej­u­dice stirred some West­ern­ers to en­ter­tain the idea of sep­a­ra­tion, but af­ter the Mul­roney govern­ment was elected in 1984 and dis­man­tled the NEP, the idea re­turned to Al­berta’s po­lit­i­cal fringe.

Re­gional con­flict is not new in Canada, or in other fed­er­a­tions. Th­ese con­flicts can arise over “taste” ( i. e., cul­tural and his­tor­i­cal is­sues) or “claim” (eco­nomic re­sources). Con­flict of taste is due to dif­fer­ences among re­gions with re­spect to laws and the role of govern­ment. Con­flict of claim arises from rich re­gions trans­fer­ring re­sources to sup­port other parts of the coun­try. Con­flict of claim is most dif­fi­cult to man­age when a small, rich re­gion is ex­pected to sup­port a large, poor re­gion, be­cause it takes l arge per- capita trans­fers from the small re­gion to make any mean­ing­ful im­pact on the in­comes of those in a more pop­u­lated re­gion. The re­cent up­roar in Spain over Cat­alo­nian in­de­pen­dence il­lus­trates both con­flicts.

Cat­alo­nia has a dis­tinct lan­guage, as well as dis­tinct laws and cus­toms. While var­i­ous Spanish kings tried to con­form Cat­alo­nia ( and t he Basque Coun­try) to Spanish ways, the strat­egy even­tu­ally failed. Af­ter Cat­alo­nia elected a sep­a­ratist mu­nic­i­pal govern­ment in 1931, it won its au­ton­omy from Spain in 1932. The au­to­cratic Franco regime stripped that away af­ter the Spanish Civil War in 1938, re­assert­ing cen­tral­ized con­trol. But democ­racy re­turned to Spain in 1975 and Cat­alo­nia re­gained its au­ton­o­mous sta­tus in 1979 when Madrid di­vested spend­ing and ju­di­cial pow­ers to var­i­ous re­gions.

Cat­alo­nia is also a rich, in­dus­tri­al­ized re­gion ac­count­ing for a fifth of Spain’s GDP, with a per- capita GDP onequar­ter larger than the Spanish av­er­age. Af­ter the de­bil­i­tat­ing 2008 re­ces­sion, Cat­alo­nian re­sent­ment grew as Madrid col­lected much of the re­gion’s wealth — es­ti­mated at eight per cent of Cata­lan GDP — to trans­fer to other Spanish re­gions. This month, Cat­alo­ni­ans voted 92 per cent in favour of in­de­pen­dence in a ref­er­en­dum that the Spanish govern­ment tried to block and de­clare il­le­gal.

The new Cat­alo­nian quest for sep­a­ra­tion il­lus­trates the con­se­quences of con­flicts over taste and claim. While Canada has had its own ex­pe­ri­ence with pe­ri­ods of re­gional con­flict over taste and claim, they have been much dif­fer­ent in na­ture. Ten­sions have less­ened since the 1980 Na­tional En­ergy Pro­gram and the 1995 Quebec ref­er­en­dum that saw sep­a­ratism lose by a ra­zor­thin mar­gin. But re­gional con­flicts have a way of re- sur­fac­ing, es­pe­cially when economies take a turn for the worse.

Quebec is a good ex­am­ple of a con­flict over taste. The prov­ince has a lan­guage and in­sti­tu­tions dis­tinct from the rest of Canada, in­clud­ing its his­tory of French-based civil law, rather than Bri­tish com­mon law. Its pop­u­la­tion favours an ac­tivist govern­ment that pre­serves its unique cul­ture and man­ages its econ­omy.

Un­like Cat­alo­nia in Spain, how­ever, Quebec is not a rich prov­ince. Its per- capita in­come is 20-per-cent be­low the Cana­dian av­er­age. Its pro­vin­cial spend­ing is heav­ily funded by equal­iza­tion and other trans­fers ar­ranged by the fed­eral govern­ment.

Be­cause other Cana­di­ans must be taxed for those trans­fers is what leads to a po­ten­tial con­flict of claim. From 1965– 99, Canada’s three rich­est prov­inces, re­spon­si­ble for the ma­jor­ity of Canada’s GDP, shoul­dered the bur­den of sup­port­ing all the other prov­inces and ter­ri­to­ries, in­clud­ing Quebec, via equal­iza­tion. But at the turn of this cen­tury, that changed. Un­der the equal­iza­tion for­mula, B. C. be­came a have- not prov­ince f rom 2000– 07. By 2009, On­tario met the same fate. That Al­berta — a prov­ince com­pris­ing less than half of Cana­dian GDP and less than 10 per cent of its pop­u­la­tion — was left hold­ing the bag, cre­ated the worst type of sce­nario for con­flict of claim.

To­day, Al­berta, B.C., Saskatchewan and New­found­land are all “have” prov­inces, de­spite hav­ing suf­fered through de­pressed re­source prices since 2014 (blame the time- lag and other lit­tle­un­der­stood pe­cu­liar­i­ties of the equal­iza­tion for­mula). The fed­eral govern­ment now re­dis­tributes taxes col­lected from those prov­inces by sprin­kling $18 bil­lion among the other prov­inces and ter­ri­to­ries. And Western alien­ation is be­gin­ning to rear its head again.

It’s not solely be­cause equal­iza­tion isn’t serv­ing the West well. Nor is it solely be­cause of Tran­sCanada’s de­ci­sion to can­cel En­ergy East in the face of reg­u­la­tory over­load. But it does arise from a sense that the fed­eral govern­ment’s pro­fessed sup­port for re­source prov­inces is hol­low.

Even though the Lib­eral govern­ment ap­proved the Trans Moun­tain pipe­line ex­pan­sion and the re­place­ment of En­bridge’s Line 3 pipe­line, it has ap­proached re­source de­vel­op­ment half­heart­edly. Other projects have been blocked or aban­doned. Reg­u­la­tory rules have changed to make ap­provals slower, more com­pli­cated and less cer­tain, hurt­ing the in­dus­try’s in­ter­na­tional com­pet­i­tive­ness. The govern­ment has raised taxes on re­source firms but its sub­si­dies for Cen­tral Canada’s man­u­fac­tur­ing and aero­space firms con­tinue un­abated. Where Ottawa pro­vided emer­gency aid to On­tario’s man­u­fac­tur­ers in the 2009 re­ces­sion, it can barely lift a fin­ger to help Al­berta and Saskatchewan with their bru­tal re­ces­sions, re­fus­ing even rea­son­able re­quests, like fund­ing a recla­ma­tion pro­gram for aban­doned oil wells that would both put skilled work­ers back to work and help the en­vi­ron­ment. That En­ergy East col­lapsed un­der Ottawa’s reg­u­la­tory over­load, ap­peas­ing the de­sires of a Lib­eral mayor in Quebec and, likely, more than a few Quebec Lib­eral MPs, is just the lat­est in a se­ries of ag­gra­va­tions that are mak­ing the con­flict worse.

To­day, Western Canada is nowhere close to the sep­a­ra­tion push of Cat­alo­nia. How­ever, if Ottawa’s pub­lic pol­icy keeps hand­ing Canada’s Coder­res their “vic­to­ries” by hurt­ing western op­por­tu­ni­ties, this coun­try’s re­gional con­flicts of claim will bring con­se­quences dif­fi­cult to pre­dict.

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