Choices and Challenges
Political power in Canada is shifting. NL isn't ready.
Justin Trudeau took the family to Tofino, British Columbia last week for a holiday.
News media chased after him because he is the Prime Minister. Other people took a strip off Trudeau because instead of speaking publicly on the first National Day for Truth and Reconciliation, Trudeau took the family for a holiday at a friend’s $18 million house. Not quite the statement most had in mind.
Trudeau’s choice of a holiday spot had another significance most likely missed.
Since 2015, Justin Trudeau’s team has aimed the party at urban, “progressive” voters. Vancouver rewarded the party handsomely on election night. Historically, the Liberals haven’t done that well in BC but these days, Liberals have a firm grip on seats in a province that once all but shunt them out entirely.
British Columbia is also one of the fastest growing provinces in the country. The population is booming and, along with other western provinces, British Columbia is part of a shift of economic power in Canada. That’s reflected in the Liberal strategy. While Liberals might not do well in Alberta and Saskatchewan, their hold in BC gives the Liberals legitimacy as a party that represents all parts of the country.
If you are in Atlantic Canada, though, things look quite different. Trudeau’s vacation choice and the Liberal election strategy reflect what economist Richard Saillant described in his 2016 book, A tale of two countries. There are two regions in the country, set apart from one another by demographics. One “can likely afford to sustain the status quo for itself.” The other – particularly noticeable in Atlantic Canada – “could well be stuck between the financial abyss and the politically suicidal prospect of scaling back social programs, to the point of turning its residents into second class citizens.”
Western Canada is younger, with a booming economy and growing population. Three of the five provinces that don’t receive Equalization are in western Canada. Even with the lone “Have” province of Newfoundland and Labrador included, Atlantic Canada is older, with an economy that remains sluggish.
More now than before, to paraphrase Saillant, the fate of the poorer and older provinces is in the hands of the younger, larger, richer ones. Economic power is political power and the centre of political gravity in Canada is shifting to the west. Ottawa’s redistribution of wealth among the provinces has changed in the last 50 years. In the 1970s, the federal government bore upwards of half the cost of social programs, according to Saillant. In the early 2000s, the federal government share was 20%.
The changes brought by COVID contradict that trend, of course. But the federal government cannot keep up the current level of overspending indefinitely, as much as the provinces might like it. The federal government will have to lower its deficit or risk far more serious problems. We’ll come back to this in a moment.
Strictly speaking, Newfoundland and Labrador isn’t like the Maritime provinces. It doesn’t depend on the federal government to make ends meet. That wasn’t always the case, but a strategic course laid by the provincial government in the 1980s and 1990s transformed the provincial economy 20 years later.
In the meantime, though, a group of Newfoundlanders and Labradorians thought the strategy from the 1950s to the 1970s - government over-spending, resource megaprojects, and give-aways - was a smarter idea. They took power in 2003 with Danny Williams as Premier.
In a handful of years, they undermined the successful strategy, erased all the gains, and set the province back further than it had been in decades. It was an impressive accomplishment. They took a public debt that was $12 billion in 2003 and made it four times four times larger and growing annually in 2021.
Their signature megaproject alone cost more than the total debt in 2003. The Williams plan will force local ratepayers to cover the full cost of the project. While others will get free or heavily discounted electricity, Newfoundlanders and Labradorians will pay ever increasing prices over 50 years. One of the companies involved will get free power for 35 years plus profit from newly privatized transmission lines for more than 50 years.
What was even more striking about this group than backward thinking was their desire to reverse the province’s strategic course entirely. The politicians of the 1980s and 1990s wanted to make the provincial government less dependent on federal transfers. The one who pays decides. And having given up the right to govern themselves once, Newfoundlanders and Labradorians would not do so again.
Instead of being a have province, Williams wanted a permanent federal handout worth at least as much as oil royalties. He and his successors fought for and won federal help with the insane Muskrat Falls project. And when that project went further and further into the hole, they looked for one federal bailout after another.
As with the strategy of self-reliance, support for the return to dependence cut across party lines. The Pea Seas pushed the return to the dark past but Liberal Premier Dwight Ball, himself an admitted Muskrat Falls lover since 2010, agreed the best way to solve chronic government overspending was federal handouts. He continued over-spending and refused to change course on Muskrat Falls.
A year after leaving office, Ball was still speaking publicly about the goal of getting back to a time when the federal government gave Newfoundland and Labrador half its annual income. Ball’s successor carried on the same ideas. His plan for electricity rates, announced before the 2021 federal election, made sure only locals paid ever-increasing rates for electricity. The plan came with another $5 billion in federal handouts on top of the handouts Ball secured and added another billion dollars to the project’s cost. To fit the mood of the time’s, Andrew Furey’s list of accomplishments after a year in office included mostly projects made possible by federal money.
So far we have been talking about choices. The federal Liberal choice to align with urban “progressives”. The choice by Newfoundlanders and Labradorians to become “have” province. The decision by others to become more and more dependent on federal handouts instead.
Choices come with consequences.
For Newfoundland and Labrador, the course we have been on since 2003 is built on the assumption the federal government will always pay. Of course, the federal government *will* pay for something, but as the past 20 years have shown, that something is never what the locals dream of. What the local politicians have called negotiations have never been negotiations. Only one side – the federal side – held *all* the power. It dictated what it would do and, inevitably, what it would do was politically limited.
The political limitation used to be the cost of doing for everyone what the federal government did for Newfoundland and Labrador. In 2004, for example, there was never any hope Williams would get the billions he wanted each year. Other provinces including Alberta and Saskatchewan would expect the same.
Williams wanted a couple of billion a year. He got a couple of billion total. Danny Williams’ political tirade from October 2004 to January 2005 didn’t improve the federal offer Prime Minister Paul Martin had committed to the previous spring. Arguably, the deal was worse. The final amount of money was larger than the value put on the October offer merely because someone changed the assumed price of oil.
Even getting less than a politician might want, getting Newfoundland and Labrador back to the time Dwight Ball and Danny Williams ream about came with other consequences. In 1990, federal cabinet minister John Crosbie famously challenged Newfoundlanders and Labradorians who challenged the Meech Lake scheme. Crosbie scolded provincial politicians for wanting to “bite the hand that fed them.” A federal politician would never – could never – say that to another province but Crosbie could easily do it to one that got half of its money from Ottawa.
The people who have dominated since 2003 missed that point. Provincial dependence on federal money would implicitly and sometimes explicitly the political control of Newfoundland and Labrador from the mainland. While people like Danny Williams and Kathy Dunderdale talked of autonomy, their goal - whether they realized it or not - was subservience.
Their thinking is so screwed up that even someone who played a key role in economic policy before and after 2003 can write about all of this without noting this basic point. Doug House wrote about the Williams era in the latest issue of the Journal of Newfoundland and Labrador Studies. House says that Williams had an advantage over other Premiers because he started with a detailed plan – Williams called it the blue print – that House and others wrote.
There are a couple of problems with this claim. First, Williams didn’t put the plan into action. It was just an election prop. Williams did something else. Second, House ignored the fundamental contradiction within the plan and with what Williams did.
The first chapter of the Blue Print, likely written by House, was a copy of the 1992 Strategic Economic Plan right down to the bit on universal basic income. This was the self-reliance strategy. The SEP accounted for all the major issues – oil and gas revenue, declining population, and globalisation – that came to pass.
The rest of the document was the old thinking, based on old ideas and the world that was 30 years in the past. That was where Williams’ head lived and that’s the part he acted on. All his goals, all his actions reflected thinking that dated from Williams time as a clerk in the House of Assembly in the 1970s. Unfortunately for him and everyone else in Newfoundland and Labrador, a lot had changed in the meantime. Neither the plan’s authors nor Williams ever accounted for that.
Williams’ main strategic goal – as House notes – centred on federal handouts: “We didn’t need five million dollar cheques, we needed billion dollar cheques.” In every respect, Williams sounded like a politician from the 1960s and early 1970s. He governed in the 21st century but Williams’ choices made sense only in the world a half-century gone. That is the model we still follow.
The trends in federal politics mean that in the next federal election, the Liberals will hold the three seats around St. John’s while the rest will likely go to the federal Conservatives. The only riding that might break that trend is Labrador but even that might change y the next election. If so, then Labrador will flip in the election after that. The trend is that strong.
That shift comes out of both social changes across Newfoundland and Labrador and political changes that reinforce the division between urban and rural voters within the province. Some of this comes from general trends across Canada. But a lot of it is purely local. Local elites - including most prominently the New Mummers - are so completely separated from the reality of the province in which they live, they take their cues on what is important entirely from outside.
The townie elites are not just indifferent to other parts of the province. They often look at rural Newfoundland and Labrador as if it was rural Alberta. Look at the popular reaction to a serious outbreak of COVID-19 in rural Newfoundland to see how wide the gap is between town and bay and how deeply felt are the hostile attitudes of the townies toward the baymen.
If the COVID angle doesn’t convince you, just remember the popular enthusiasm of slashing rural Newfoundland and Labrador to save the urban centres from the cost of government overspending. Never mind – as they never minded - that it was the urban centres that were actually benefitting most from the unsustainable government spending. It is the same, anti-rural hostility as in the COVID response. And what is even more striking is that it frequently came from people who were themselves not long from a postal code west of Holyrood.
The problem for the urban elites in Newfoundland and Labrador is that their planned reliance on federal handouts comes at a time when federal politics is increasingly shifting away from those handouts. That’s the shift we noted earlier as political power shifts to western Canada.
On the surface, what just happened to Andrew Furey looks a lot like what happened to Danny Williams and for the same reasons. For one thing, when helping one province, the federal government must always be mindful of what other provinces will want. For another, Williams and Furey both suffered from amateurism and inexperience in dealing with the federal government.
The result was that Furey needed at least $15 billion to take Muskrat Falls off the backs of local taxpayers. What he got was $3 billion in cash and another billion dollars of new debt that actually drove *up* the total bill for local ratepayers. Newfoundlanders and Labradorians are still on the hook for $40 billion from now until 2071.
The difference Newfoundland and Labrador faces now in 2021 is the shifting political tide against the kinds of transfers on which the local elites pin their hopes. The federal Liberals won’t be able to hand out cash like they do today. They won’t have the money and the people contributing the cash through their taxes don’t want it handed out as freely as the federal government did before.
What’s worse for the local elites, there may well be a federal Conservative government within the next couple of years or election cycles. It won’t take much. The federal Conservatives are dominated by people who think the federal government should transfer less to dependent provinces or, in the extreme versions, cut them off entirely. They won’t be looking favourably at demands for more cash even if – by some miracle – that cash is available.
Practical limits, political inclinations, and the realities of interprovincial and federal-provincial politics within Canada put the strategy Williams’ successors follow out of step with the reality the province faces.
Anyone who thinks the tough times are over is deluded. They haven’t even started yet.
And no one around these parts has noticed.