“We must love one another or die,” W.H. Auden warned. But in Canada, sometimes it’s difficult to find the love. There is so much country, and there are so few of us, that each cluster withdraws into its own solitude. And there are so many solitudes. Apart from language, there really isn’t much that makes Quebec society that much more distinct than Newfoundland’s, or Nunavut’s, or Calgary’s for that matter. We’re like the United States in that respect—so many disparate cultures inhabiting one political space that sometimes it’s hard to understand how we keep it together. The answer, of course, is that both countries have federal systems of government, allowing each region to go its own way in local matters, bound with the others in common cause only on the great national issues.
For the Laurentian elites, this wasn’t enough. They hoped that a broadcasting network here, an arts grant there, a national social program, or a railroad or a highway would bind us all together. The railroad certainly helped, but it was built well over a century ago. Public health care seems to have taken root, along with a certain fondness for the Charter of Rights and Freedoms. But for the most part, each region of the country still goes its own way.
And we’re going to go our own way a lot more than we used to. As with so much else that we talk about in this book, it doesn’t matter whether you consider this a good thing or a bad thing. What matters is that you understand it’s a thing. Laurentian conventional wisdom divided Canada between French and English, between Quebec and the ROC (the dismissive Laurentian acronym for the Rest of Canada). But there is a new, even more powerful divide emerging: between poor and rich, between declining and growing, between past and future. The dividing line runs from the southern tip of James Bay to just west of Montreal. We call it the Ottawa River Curtain.
Flush with a majority government, with the opposition weak and divided, and with the books dangerously out of balance, the government of the day decided to tackle unemployment insurance. We’re talking Jean Chrétien in the nineties, not Stephen Harper in the 2010s. The Liberal reforms were not that different from the current Conservative ones: seasonal workers (primarily in the Atlantic provinces) who were chronically dependent on Unemployment Insurance during the many months when they weren’t working would see their benefits cut back. The goal was to lessen dependence and encourage year-round jobs. The result was a spanking: the Liberals lost 20 seats in the region in the 1997 election. The reforms were quickly scrapped. The only change that remained was that Unemployment Insurance became Employment Insurance—your federal government at work.
In the early days of the proposed reforms, the government hired Darrell Bricker and his Ipsos (then Angus) Reid Group to conduct a series of focus groups throughout Atlantic Canada on the proposed UI changes. Focus groups are structured discussions with 10 to 12 randomly recruited people from a local community. Bricker led the discussions, which were typically held in rooms with one-way glass so that the groups could be viewed by the client (in this case, government officials) without disturbing the conversation. In smaller communities, side-by-side rooms in local hotels were used.
The focus groups revealed that Atlantic Canadians have what might be called a unique approach to economic theory. For example, it became obvious very quickly that the ordinary folks who were there to talk about Unemployment Insurance reform were intimately familiar with the rules of the program—what you needed to qualify for benefits, how much you could expect to get—but not much interested in considering where the money came from. To them, unemployment insurance was a particularly generous form of car or house insurance: you paid your premiums every month, and in exchange you were entitled to collect your benefits every year.
To test the resilience of this attitude, Bricker introduced notions taken from a list put together by policy experts. He asked members of the group how much they paid into UI each year, and how much they collected in benefits. The premiums were typically in the hundreds, and the benefits in the thousands. He would then ask: “Does this seem fair and reasonable to you?” While briefly knocked off stride by such a question, the focus group members recovered quickly, insisting that insurance was insurance, regardless of the relationship between premiums and benefits.
“Let me get this straight,” Bricker would press them. “You pay the same premium as everybody else in the country, you collect much more in benefits than the premiums you pay, and you expect to do this every year. Does this make any sense to you?” After some back and forth, they would generally agree that, yes, it made perfect sense.
Bricker would then introduce a comparative worker. “Imagine the life of an individual who lives in Oakville, Ontario,” he would say. “He or she commutes a couple of hours every day to work and back. They get a few weeks a year of vacation. They pay the same UI premiums as you, but they never collect benefits. Do you think it’s fair that they are asked to pay for somebody down here who collects every year?” For a few moments, the members of the group would look down at the floor. But invariably, someone would pipe up with something like: “That’s what it means to be a Canadian. Those who can afford to pay, pay, and those who need the benefit collect it. That’s the Canadian way.” Karl Marx couldn’t have put it any better.
Almost 20 years later, nothing has changed. In the 2012 budget, the Conservatives introduced changes to EI that require seasonal workers to travel to take jobs, and to accept work at a lower wage or in another field, or risk losing benefits. The proposals were greeted with outrage in Atlantic Canada, where the Conservatives can now expect to win few if any seats in the next election. This time, too, the feds convened focus groups before announcing the reforms. Those conducting the sessions reported a peculiar mindset among seasonal workers, who seemed not to understand that EI made it possible for them to live in communities where there were no full-time jobs. “When the question of whether EI rules or ‘generosity’ affect thinking about moving, the usual reaction from participants was a blank stare, as most did not consciously relate the two,” the report concluded.1
These studies capture perfectly what we call the Atlantic Canadian Reality Distortion Field. It’s a place where facts go to die, where the laws of economics are miraculously suspended, and where a universal belief system is founded on the universal denial of reality. Only in Atlantic Canada—and in a few select remote sections of other provinces—would anybody suggest that it’s perfectly reasonable to work in a “seasonal industry” with the expectation that you get to work part of the year, and then the government takes over from the employer for the rest of the year while you do nothing—at least, nothing above the table. Only in Atlantic Canada would it be universally accepted that this should never, ever change.
What do we mean when we say “universal”? The Atlantic premiers called a press conference in June 2012 to protest the Harper government’s EI rule changes. Prince Edward Island Premier Robert Ghiz patiently explained some economic fundamentals to what he clearly thought were rather dim-witted voters and politicians down the road. “Central Canadians, all Canadians, like to enjoy our lobster, our french fries, our mussels, our oysters, but they have to realize that these are all seasonal in nature,” he explained, as the distortion field hummed quietly in the background. “So we need the federal government to be able to realize that one size does not fit all across our country.”2
If there are to be potatoes in Toronto, there must be wage subsidies for Prince Edward Island. No pogey, no potatoes.
New Brunswick NDP MP Yvon Godin, raging against Conservative perfidy, made the same point at a forum in Ottawa that spring. While John Ibbitson listened slack-jawed, Godin argued with Acadian passion that without subsidies for Maritimers there would be no lobster fishery, and no lobsters for anyone in Ontario to eat.
Outside the distortion field, fundamental laws of supply and demand ensure that, even without subsidies, potatoes and lobsters are available at a market-clearing price in places as far from their source as Toronto. It might even be possible to get them in Winnipeg.
Back inside the distortion field, politicians, fishers, and union leaders warn that, without the federal subsidies, family-owned businesses will be displaced by giant international corporations that will swoop in, buy up the licences, force governments to scrap legislation designed to protect local businesses and seasonal workers, and replace the whole thing with some monstrous alternative based on privately generated wages and profit. Another name for this horror is capitalism.
Don’t blame Atlantic Canadians for being trapped within this distorted perspective. The Laurentian Consensus created it by emphasizing national unity over economic reality. The mindset goes all the way back to John A. Macdonald and the National Policy, which protected manufacturers in Ontario against foreign competition. The fishing industry is simply a vestige of this ancient mercantile system. While most of the rest of the country has shaken off the thrall of protectionism and subsidies—even Liberals ultimately, if reluctantly, embraced the free trade agreements with the United States and Mexico—Atlantic Canada remains trapped within it, which may be why it was the only region of the country that largely remained loyal to the Liberals in the last election, and where the last remnants of the Progressive Conservatives, such as Peter MacKay, can still be found.
The exit poll run by Ipsos Reid on election day shows why. While Atlantic Canadians shared the view with the rest of the electorate that the economy was the primary issue in the country, they preferred the “Family Pack” of spending solutions offered by the Liberals to the austerity diet proposed by the Conservatives. And why not? After all, government already offers them a lifestyle to which they have long been accustomed but for which they don’t have to pay. Who wouldn’t want more of such a good thing?
It boils down to values. A Harper-friendly conservative sees government as part of the problem, not the solution. For Atlantic Canadians, the state is more likely to be seen as the only solution. Understandable, since in Atlantic Canada the state is a miraculous creature that provides vastly more in services than it receives in taxes.
Federal Transfers as a Proportion of Provincial Budget3
| Province | Federal transfer | % of provincial budget |
| Alberta | $3.7 billion | 12.2 |
| Ontario | $19.5 billion | 19.4 |
| New Brunswick | $2.5 billion | 36.8 |
| Nova Scotia | $2.9 billion | 32.1 |
But the Atlantic Canadian Reality Distortion Field is weakening and may soon collapse. The four provinces are rapidly aging—people over 65 make up roughly 16 percent of the population versus a Canadian total of 14.8 percent—and none is doing a decent job of attracting immigrants.
Immigrant Population of Atlantic Canada in 2006
| Province | % of Canada’s population | % of Canada’s immigrants |
| New Brunswick | 2.3 | 0.4 |
| Prince Edward Island | 0.4 | 0.1 |
| Nova Scotia | 2.9 | 0.7 |
| Newfoundland and Labrador | 1.6 | 0.1 |
That is what demographic decline looks like. The Atlantic Canadian Reality Distortion Field is destroying what is left of the local economy, and the result is a slow-motion population collapse. Occasionally, you will find a politician who worries about this. Usually, he or she will call for federal aid to combat it.
There are beacons of hope. Newfoundland’s oil industry, coupled with the enormous potential of Labrador hydro, is building a new, skilled workforce in that province; the recent announcement of the shipbuilding program for Canada’s navy offers tremendous possibilities for attracting skilled workers to Halifax. And if an educated population is an economy’s most important asset, then the Maritimes should be thriving, thanks to its network of excellent universities.
But for the seasonal workforce, for industries that casually count on government to look after their workers for half of the year, the future is bleak. The old economy is doomed by an aging population and by too few immigrants. Atlantic governments talk about bringing in newcomers and jump-starting renewal, but their efforts are invariably half-hearted, they invariably fail, and they invariably end with an appeal to Ottawa for more assistance.
And though the distortion field blinds most Atlantic Canadians to this new truth, the reality is that the collapse of the Laurentian Consensus must also bring about the collapse of the relentless predictability of transfers from west to east. The day will soon come when the Oakville worker downs tools when it comes to supporting PEI fishers. Already rebellion is in the air.
For more than a century, Ottawa and Ontario had a compact that guaranteed Canada’s central province would always be its most populous and powerful. That compact is broken. Imperial Ontario has lost its empire. Loyal Ontario no longer has reason to be loyal. Prosperous Ontario is under threat. Liberal, Laurentian Ontario is on the wane. Conservative, Pacific Ontario is on the rise.
There is a reason that middle-class suburban voters have increasingly supported the Conservatives in every election since 2004. The reason is wheat.
Most Canadian provinces consist of a hub city surrounded by hinterland. Montreal is the hub of Quebec; Halifax of Nova Scotia; Winnipeg of Manitoba; Vancouver of British Columbia; Edmonton and Calgary of Alberta, and so on. Only Southern Ontario is built on a grid of roads connecting villages, towns, and cities more or less evenly distributed from Windsor to Cornwall.
As the Liberal MP and economist John McCallum4 wrote more that 30 years ago, the soil there is so fertile and the climate so, well, not awful, that the first settlers got rich selling wheat to hungry Britain during and after the Napoleonic wars. The rivers and streams provided the falls and rapids that powered the grist mills that ground the wheat, which is why so many towns in southern and central Ontario were built beside rivers. The Industrial Revolution turned those grist mills into factories and Ontario into the economic engine of Canada, with almost 40 percent of its population and GDP. Wheat made Ontario wealthy, and wealth made Ontario confident. But hard times and lost jobs have shaken that confidence. Ontario voters—at least, suburban middle-class Ontario voters—support the Conservatives because (though they might not be aware of the historic details) they are afraid they might be losing their empire, the empire that was founded on wheat.
In the early years of this country, when Ontario reigned supreme, Queen’s Park and Ottawa made a deal. The federal government would protect Ontario’s interests by throwing up tariff barriers that forced consumers in other provinces to buy Ontario products. Toronto banks would dominate finance. Roads and rail and, ultimately, air travel would link east and west to centre. Ontario would be the imperial heart of Confederation; the Western provinces would be little more than colonies.
And Toronto would be the imperial capital, part of an imaginary (because only Canadians imagined it) triangle that had New York and London as the other fixed points. Toronto would be the country’s cultural centre, home to the big publishing houses and broadcasters. It would have the biggest and best university. If anyone in Canada ever came up with a new idea, they would come up with it in Toronto.
In exchange for centrality, Ontario would sacrifice identity. To be an Ontarian—a word no one uses, because it has so little meaning—was to be a Canadian. Ontario would share its wealth with the poorer regions of the country through the equalization program, because Ontario had so much to give. Ontario would consent to being underrepresented in the House of Commons, because it had enough of the power that mattered not to care. Let the other parts of Canada nurse their local accents and particular grievances. Ontario would serve the national interest, because it was the national interest.
This was the first, and possibly greatest, of the Laurentian contracts, the one that bound Ontario to the other English-Canadian provinces and they to it. They would be the market, Ontario the seller. They would sign their mortgages with Toronto banks, buy cars made in Windsor and Oshawa, listen to news broadcasts from Toronto newsrooms, ultimately receive their baby bonuses or equalization cheques courtesy of Ontario taxpayers. The contract, of course, was negotiated in Ontario among Ontario elites. Everyone else was simply asked to sign on the dotted line. Most had little choice. They needed the money.
Ontario premiers would sometimes chafe at the synchronicity between Ottawa and Ontario. As the chief representatives of the provincial government, they had their own concerns: Toronto groaned under the influx of newcomers and needed billions to upgrade roads and public transit; the Ontario economy competed with that of the Great Lakes states, whose voters have an enormous influence on the outcome of presidential elections. To attract investment, Ontario needed to offer incentives that sometimes only Ottawa could provide. And as the feds built equalization components into each and every national program, from health care funding to national research chairs, Ontario premiers demanded that more of the money stay at home, where it was needed.
But as the political scientist David Cameron has observed, an Ontario premier is “like a general without an army. He can climb on his horse and ride to Ottawa and pound the table and say what he needs. But where are the troops? The feds know where the troops are. They’re back home, voting for them, and thinking about the national interest, and assuming somehow Ontario’s concerns are going to be met.”5
The premier of New Brunswick speaks for New Brunswick; the premier of Alberta for Alberta; the premier of Quebec for the Quebec nation. But who does the Ontario premier speak for? With more than 100 MPs in the House, and with a majority of those MPs most likely on the government’s side—otherwise, it wouldn’t have the seats needed to win government—prime ministers could and did dismiss Ontario premiers, since the same people who voted for one had voted for the other, and Ottawa had easily as great a claim on the Ontario’s voter’s affections as Queen’s Park.
No more.
The Democratic Party strategist James Carville once described Pennsylvania as a state with “Philadelphia on one end and Pittsburgh on the other, and a whole lot of Alabama in between.” The economic shocks of globalization and recession have turned Ontario into a province with a little bit of Manhattan surrounded by a whole lot of Ohio. And Ohio is restless.
Toronto can be ugly: squat houses, mostly indifferent commercial architecture, an aborted waterfront, and no central park. Decades of municipal politicians who were at best mediocre and at worst crazy, coupled with provincial and federal governments that could score political points elsewhere—anywhere, actually—by thumbing their noses at Hogtown, have left the city roads crumbling and public transit a full generation behind current demand. And the sprawl is godawful: tract housing, arterial roads, and shopping malls stretching 100 kilometres in every direction, with every kilometre looking just like every other kilometre and all of it a downtown elitist’s nightmare.
And yet Toronto is the world’s most exciting city. This is not because its theatre surpasses London’s or its publishing houses outshine New York’s—because they don’t, not by a long shot. Its music scene is good but not great; its museums and galleries are second tier. Its universities range from mediocre to admirable, but none approach the best American schools.
Toronto is the world’s most exciting city because it is ground zero in the multicultural experiment: the place on earth where more people from more places live together than anywhere else on earth.6 These people are the engine of the city’s cultural vibrancy. They are what connects it to the world. They are the final proof that immigrants don’t take jobs from the native-born; they create jobs for them.
Services drive the Greater Toronto region’s economy: 6 million people take in one another’s washing. Not many people make anything there any more, but the financial services sector is strong; the cultural industries have never been this vibrant; everyone sells this, markets that, or consults; every other storefront is a restaurant. Unemployment has been running higher than the national average and the housing bubble is always a pinprick away from calamity. But despite every challenge—did we mention the crazy mayors?—Toronto is alive and growing and thriving and plunging into this century with a grin.
Outside the city, and its suburbs and exurbs, it’s a different story. Three hundred thousand manufacturing jobs have disappeared in Ontario. Globalization is part of the problem; the recession was part of it; the strong dollar is part of it too. Some stars flamed: Research in Motion used to be Apple; now it’s Nokia.
The factories by the rivers where the grist mills used to be now sit empty. Ambitious developers have turned some of them into condominiums, where there is demand, or converted them to stores and offices. Others just slowly fall down. The American automakers have recovered from their near-death experience, but by retooling with fewer jobs and lower wages. Right to Work states south of the border are luring companies away with promises of lower wages and no strikes. Unemployment rates in Ontario have been above the national average since June 2006. Its population growth rate has dropped below the national average, according to the 2011 census. The province took in 100,000 fewer immigrants between 2006 and 2011 than it did between 2001 and 2006. The McGuinty government’s efforts to promote alternative energy that would, in turn, develop a new energy industry through research and investment left the province with skyrocketing electricity bills and staggering debt—and not much to show for it.
Ontario is turning into a Springsteen song.
This wasn’t supposed to be part of the deal. The deal was that the heartland would grow ever richer, and then send the money to the provinces that needed it. But Ontario has become just another region. David MacKinnon, a former senior public servant in both the Nova Scotia and Ontario governments who also served as CEO of the Ontario Hospital Association and the Ontario Development Corporation, has studied the equalization system extensively. He observes that Ontario taxpayers—who pay twice as much into equalization as the province receives from the program—endure lower levels of public services than those in receiving provinces.
There are twice as many federal bureaucrats, as a share of the overall population, in Prince Edward Island as in Ontario, even though that is where the national capital is. The island also has three times as many provincial bureaucrats, on a per-capita basis, as well as 50 percent more nurses, 28 percent higher university funding, and twice as many long-term care spaces.
Twenty-six percent of the Manitoba and Nova Scotia labour force is employed in the public sector. In Ontario the figure is 18 percent. Both Manitoba and Quebec subsidize electricity consumption, MacKinnon points out. Ontario taxpayers help pay for those subsidies.
In fact, over the past 50 years, MacKinnon calculates, Ontario has on average contributed 4 percent of its gross domestic product to support other provinces. This is roughly the same percentage of GDP that the United States spends on defence, and the U.S. over the past 50 years has been at war more often than not.
“Viewed from this perspective, the impact of the regional subsidy effort on Ontario is like fighting a 50-year war,” MacKinnon observed in an October 2012 speech.
Everyone suffers: Ontario is less able to compete with other manufacturing-based economies that don’t see a sizable portion of their GDP drain away to other jurisdictions. Receiving provinces pay, too, through subsidy distortions that undermine the private sector. Ganong Bros. Limited, the New Brunswick confectionary company, must import Romanian workers to keep its factory going, even though unemployment in the province is 11 percent. In Prince Edward Island, where the unemployment rate is also 11 percent, it’s Russians and Ukrainians who are brought in to work in the fish plants.
The distorting, debilitating effect of equalization “harms productivity everywhere,” MacKinnon states. But Ontario, as the largest economy, suffers most. “It could cut us off from what could otherwise be a very bright future,” he warns.7
The Atlantic Canadian Reality Distortion Field is about to come up against the Ontario Reality Check. Ontario middle-class suburban voters are worried about their own jobs. Many of them are immigrants, still pushing to get the second foot firmly planted. The idea that only 40 percent of all unemployed Ontario workers in the last recession qualified for EI, even though the province had the fourth-highest unemployment rate in the country, while 90 percent of the unemployed in Newfoundland and Labrador received a cheque, is intolerable. The Ontario premier may finally be getting an army.
The Conservatives know this. It is why they stripped the equalization component out of the health transfers that Jim Flaherty announced in December 2011. It is why in the 2012 budget they finally decided to start reining in Maritimers’ unemployment entitlements.
The Conservatives will be sorry, some warn. They will be shut out of Atlantic Canada for a generation. What Atlantic Canadians don’t get—and won’t get, until they finally start to dismantle that damned distortion field—is that no political party will ever form a government without Ontario suburban middle-class voters, and those voters are hurting. They’re scared they might lose their jobs, or their mortgages might sink underwater, or their children might still be living at home at 30.
As we mentioned in the previous chapter, some Laurentian elites believe that these frightened voters will make common cause with Quebecers—and, who knows, with Atlantic Canadians, for what it’s worth—and bring a progressive party to power. They’ll join with the other have-nots grappling with declining industries and populations in exodus to demand more from Ottawa.
But Ontario still gives, whether it wants to or not. It is still the economic engine of the country, even if it’s not firing on all cylinders. Policies that retard growth are policies that damage Ontario. The political parties that promise this social program and commit to protect that sacred cow will win votes in the receiving provinces; the political party that promises to protect jobs and keep taxes low will get votes in Ontario. Ontario’s natural political allies are now their former colonies in the West, where there is growth and wealth and increasing impatience with those who take rather than give and call it the Canadian way.
Something else is happening, too. As immigrants transform Toronto—and, to a lesser but still real extent, Ottawa and London and other Ontario cities—Asian immigrants are causing the province to look west even more. In the eyes of these new arrivals from Colombo and Manila and Shanghai and Mumbai, the Pacific (or the Indian), not the Atlantic, is their ocean. Their cousins live in Calgary and Vancouver, not Montreal and Halifax. They are turning Ontario from a European, Atlantic province into an Asian, Pacific province. This is another reason the bonds are strengthening between Ontario and the West, at the expense of the East.
And so the Ottawa River Curtain descends, separating the impoverished, dependent Atlantic East from the growing, independent Pacific West. East of the curtain is dependence—demographic decline, aversion to immigrants, provincial budgets addicted to federal handouts. West is aspiration—growing in population, struggling to find its feet in the twenty-first-century economy, bolstered by natural resources in the West and manufacturing (what’s left of it) and financial services in Ontario. In the Pacific West there is a rising impatience with the dependency of the Atlantic East. The Laurentian appeasements are breaking down. Something else is needed.
What is needed, of course, is to lift the curtain. But how? Who will tear down this new wall? No one east of the Ottawa River Curtain seems to have an answer. All they can do is gaze with envy at the West.