Canada is one of the oldest and most successful federations in the world. One can make a case that it is the most successful federation. Unlike those of similar size and varied geography, such as the United States and Australia, Canada contains an ethnic minority of 25 per cent concentrated in one province. Unlike those such as Switzerland with large minorities, Canada has an enormous geographic mass with a wide variety of regional economies and interests. The unique combination of factors that make federalism essential for Canada also make it the most decentralized federation in the world, and that is one of the reasons it has been so successful. Unlike the United States, Canada was not held together by a war, and unlike the former Yugoslavia, it was not held together by a one-party dictatorship. The BNA Act has never been changed significantly because it reflects Canadian realities, and it is so flexible that Canada became a unitary state for the duration of two world wars by a simple Act of Parliament.
On July 1, 1867, few people had any right to expect such success, though some dreamers spoke and wrote about an unlimited future. In the late 1850s, there was no reason to think that the seven British North American colonies would adopt a federal system of government or unite into a single colony. At the time hardly any politician or interest group endorsed such revolutionary changes, including the government of Great Britain. A few years later, many had changed their minds, mainly as a result of political stalemate, Britain’s desire to see the colonies united, economic factors, and the real or imagined threat posed by the United States.
Of the two elements that made up Confederation—adopting a federal system of government and uniting the colonies—the first was the easiest. By August 1864, a strong majority of French-Catholic and English-speaking politicians in the Province of Canada had agreed to adopt federalism and had agreed on the broad outlines of that scheme. Subsequent conferences in Charlottetown, Quebec City, and London worked out the details, but the broad outline of what those Canadian politicians agreed upon was not altered in any significant way. What was meant by the clauses they drafted remained a matter of dispute and still does—that is the nature of federal constitutions.
The more difficult part of the Confederation scheme was uniting the seven colonies—Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Canada, British Columbia, and Vancouver Island. The Canadian Assembly was the only one to endorse the Confederation proposal. New Brunswick was manipulated into joining, and Nova Scotia was forced to become a province. PEI rejected the scheme but had to join to avoid
bankruptcy, and Newfoundland said no in 1869. Later, BC was bribed with the promise of a railway, and Newfoundland approved joining in a 1949 referendum that many saw as being manipulated. Manitoba, Saskatchewan, and Alberta were created by the central government, but with inferior status to the other provinces, a matter that created difficulties until 1930 and arguably up to the present day.
It took eighty-two years to complete the process of uniting the colonies, and the twists and turns on that long road suggested that there was nothing inevitable about the process at all. It was a triumph of people over obstacles, of politics over geography, and it might have turned out quite differently. Along the way, the super-colony created in 1867 gradually became more and more independent, the best date for achieving sovereignty being 1931. But there were so many stages in that evolution that there is little agreement on any date, the lack of clarity and agreement apparently being another
characteristic of Canadian federalism. That lack of clarity facilitated the myth that Confederation brought independence, along with the companion myth that it created an instant nation.
Federalism was adopted in 1867 because English-speaking Canadians had failed to assimilate French Catholics, and the cultural differences between the two groups were so great that they could not agree on policies to govern matters that had cultural elements. The solution to that problem was to create separate provinces for Lower and Upper Canada and give them responsibility for most of the things on which the two groups had different views. Each was then maîtres chez nous, masters in our own house, and neither could dominate the other. Ottawa was given general matters, the things the two groups could agree on. These were more important for English Canadians, who later created the argument that the federal government should be stronger or dominant on the grounds that it had the important responsibilities.
But the things the provinces controlled were the ones important to French Canadians, and indeed almost all of a citizen’s dealings with governments or institutions after Confederation were with the provinces, not Ottawa. Many English-speaking Upper Canadians also wanted local matters to be handled by their provincial government and not by a central government in which French Catholics might wield considerable power, and many Maritimers did not want a central government dominated by central Canadians managing their local issues. While they haggled over details, there was very broad agreement on the division of responsibilities between the two orders of government.
The Fathers of Confederation did not treat the provinces the same for the very simple reason that they were all different. English-speaking Canadians were a minority in Lower Canada within a French-Catholic minority in the Province of Canada, and those two minorities required special treatment, namely provincial status for French Catholics and full protection for the English-speaking minorities in Quebec. To the Fathers, it did not make sense that small provinces should have the same number of senators as large ones, and a great deal of effort went into allocating Senate seats. The structure of the Senate was copied from the United States, its more limited powers were modelled on the British House of Lords, and it has never represented the provinces or been a fully satisfactory partner to the House of Commons. Other examples of asymmetrical federalism included different subsidies, powers, and law codes. Ever since 1867 central governments have treated the provinces differently, and one of the puzzles of recent history is the fact that many people seemed to believe that all provinces were the same. One of the defining characteristics of Canadian federalism is the fact that it is asymmetrical, that no provinces are “like the others,” especially Quebec.
With three colonies united into one and a federal constitution in place, the new Dominion of Canada set out to establish a working federal system. It went through many stages and crises, and the journey is still underway because a federal constitution can never be fixed in time. Whether a federation survives depends on the flexibility of the citizens in adjusting the framework to new circumstances and dealing with inevitable tensions and conflicts between groups, regions, and the two orders of government. The first 150 years saw Canadian federalism meet those many challenges, but not without a number of major battles along the way. Indeed, in 1995, federalism came within a whisker of failing.
The new central government of 1867 was entrusted to Sir John A. Macdonald, who executed the responsibilities with enormous success. He implemented the new scheme at the federal level and, to a degree, in the new provinces of Quebec and Ontario; pacified disgruntled provinces; added the North-West Territories and the provinces of Manitoba, BC, and PEI; and knitted the whole together with the CPR and his economic policies. He helped establish viable two-party systems at the federal level and in some provinces. He established the precedent that the central government would not interfere in education—it was up to the local Protestants and Catholics to work out the education systems within their provinces.
Macdonald was also a rather strange choice to implement federalism since he clearly preferred a unitary system of government. He never did accept federalism and set out to make the central government superior to the provinces. The result was a long series of battles with various provinces, especially Ontario. Macdonald lost most of those battles and, in the process, discredited legitimate federal powers such as disallowance. The question as to what kind of federalism Canada enjoyed had been answered by 1896—a political entity as diverse as Canada required a genuine federal system with both orders of government autonomous in their areas of responsibility. That was the outcome of political and court battles and the will of the people.
The first decade of the twentieth century was the Golden Age of Federalism. Not only had Macdonald’s attempts at centralization failed, but Prime Minister Wilfrid Laurier and his cabinet and party believed in classical or genuine federalism. Aided by a wave of prosperity and the arrival of millions of immigrants, Ottawa got on with the tasks the constitution assigned to it and the provinces got on with theirs. Alberta and Saskatchewan became the eighth and ninth provinces in 1905, and the inevitable problems of creating new provinces and adjusting the Dominion to accommodate them were handled reasonably well. Laurier also made a major effort to correct one of the most significant faults in the original agreement, the fact that none of the provinces except Ontario received adequate subsidies from Ottawa to allow them to execute their responsibilities properly.
After 1911, Ottawa’s budgetary surplus led the new Conservative regime of Robert Borden into a new phase of federalism. The exercise of power is central to politics in any regime, and money is central to power. Competition between the orders of government is inevitable in federal systems, and no written constitution can prevent governments and political parties competing with each other. If governments have money, they will use it, and Borden did. Amongst his first acts was the launching of new programs in provincial areas of responsibility in spite of the fact that the constitution said they were “exclusively provincial.” The constitutionality of those programs was challenged unsuccessfully, revealing one of the most significant problems with constitutions. That is, if a government can get away with doing something unconstitutional according to the written document, then it becomes constitutional by convention or the passage of time. Borden had begun seriously blurring the lines between federal and provincial responsibilities in one direction only—federal encroachments on provincial jurisdiction. Since it has usually been the federal government that had more money than needed, the pattern ever since has been federal encroachments on provincial jurisdiction, with very little movement in the opposite direction.
After the Great War, things would never go back to “normal,” and among those things affected were federal-provincial relations. Four years of exercising enormous power affected politicians, bureaucrats, and their supporters. New conditions such as the health and welfare of veterans and the challenge of dealing with post-war economic problems gave Ottawa legitimate interests in areas of responsibility that were provincial under the constitution but could hardly be ignored because of that fifty-year-old document. So it was the constitution that was ignored, not the pressing demand for federal action on these new problems.
The war gave Ottawa a new tool to carry on with its encroachments into provincial jurisdiction, a tool that became the centre of bitter conflict that has never ended. The BNA Act gave Ottawa the right to collect taxes by any means and limited the provinces to the unimportant and unpopular fields of direct taxes. Ottawa left that field alone, and by 1914, it was “convention” that only the provinces collected income taxes on corporations or individuals. In 1917, Ottawa entered the field and has collected income taxes ever since. The rise of the welfare state then produced a new and challenging era in federal-provincial relations that has endured to the present. Welfare is very clearly a provincial matter under the constitution, and the reasons for that never have changed, namely the fact that different regions have different views on welfare as well as different needs and capacities. In 1927, however, Ottawa decided to establish the Old Age Pension program.
The argument advanced to justify this encroachment on provincial jurisdiction was called the “spending power,” the idea that since Ottawa could collect money by any means, it could spend it on anything, and that would not violate the constitution if the provinces accepted it. Five did, three could not afford to, and Quebec refused because the program violated the constitution and, in effect, imposed English-Canadian values. That was precisely what federalism and the BNA Act were designed to avoid, but the program was gradually adopted by all provinces because they could not afford to remain aloof. The fiction developed that their acceptance was “voluntary,” and de facto the constitution had been changed to allow Ottawa to initiate programs in almost any area of provincial responsibility. In fact, however, the provinces could not reject such federal programs so their acceptance was not really voluntary. “Exclusive” provincial responsibility for welfare ceased to exist and the most significant precedent for changing the constitution had been established, but the spending power was never legitimized by a formal amendment to the BNA Act.
The Depression marked the low point of federalism. The municipalities could not meet the welfare needs of their populations, and the poorer provinces could not provide adequate help to them. The federal government alone had the financial means to enable those on welfare to survive with a minimum of suffering. It provided huge amounts of financial support, but it was never enough and never nearly as much as it could have been. Ottawa had all the constitutional powers it needed to mount massive spending programs and increase the amount of money in circulation. Instead, the Conservative regime wound up proposing a series of measures that were clearly in provincial jurisdiction, and the successor Liberal regime proposed a study of the problem. Desperate provinces proposed real solutions that were also beyond their powers. It was the politicians that failed the people, not federalism and the constitution.
The Second World War turned Canada into a unitary state once more, with the full support of the provinces. To help finance the war, the provinces allowed Ottawa to collect their taxes and return a fixed amount to cover their expenses, which were basically frozen. During the war Ottawa’s revenue and spending vastly increased, creating an enormous shift in the balance between the budgets and power of the provinces and Ottawa. A number of civil servants and politicians decided that Ottawa should retain much of the enormous power it had exercised politically and financially in wartime, and that the means to do so was for Ottawa to implement the welfare state with programs in welfare, health, and perhaps education. The federal government was determined to maintain control of taxation and a high level of spending with the provinces limited to the role they had been reduced to by the Depression and the war. Most of the poorer provinces agreed, the richer ones and several others did not, and Canada was set for a half-century struggle over which order of government would provide the welfare state. The fact that the constitution clearly said it was the provinces cut little ice in Ottawa or the poorer provinces, but was crucial to the thinking of Ontario and Quebec.
Ottawa’s wartime efforts to encroach on provincial affairs were rebuffed in conferences at the end of the war. Ottawa’s fallback position was to implement programs one by one as circumstances permitted, a strategy that made the process ad hoc and highly political. The baby bonus, for example, was introduced just before the 1945 election. Federal aid to universities resulted from a tax windfall and provoked a bitter battle with Quebec. A crucial development in federal-provincial relations in the post-war period centered on the attempts by Ottawa to retain control of taxes, collecting them for the provinces and returning a proportionate amount plus a bit more. Quebec’s Premier Maurice Duplessis refused to participate on the grounds that doing so would make his province subordinate to Ottawa. That began to drive huge wedges between Quebec and Ottawa and between Quebec and the other provinces. Eventually, every other province followed Quebec’s lead and accepted its principle—provinces cannot be independent if Ottawa collects taxes for them.
The federal encroachment into provincial matters continued under the regimes of Louis St. Laurent and John Diefenbaker, with new or enhanced programs in pensions, hospital insurance, higher education, infrastructure such as local roads, winter works to ease unemployment, and housing. Federalism changed when a western Canadian, John Diefenbaker, formed a cabinet in which central Canadian ministers were in a minority for the first time in history. That government was the first to place a high priority on federal support to the West and Atlantic Canada. It also institutionalized equalization payments so that poorer provinces could offer their citizens services comparable to those of richer provinces without excessive taxation. From then on, one of Ottawa’s major roles in federalism was the transfer of wealth from the regions that benefited the most to the ones that benefited the least.
The adoption of the equalization system in the late 1950s changed forever the functioning of federalism in Canada. Essentially, central Canadians accepted that federalism worked to their advantage more than to that of the other regions, and that it was only fair for Ottawa to provide money to the have-not provinces so they could provide services similar to those of the richer, have provinces. The formula was changed several times, and the system was entrenched in the 1982 Constitution. The program did not, however, stop the have-not provinces asking for special deals on shared-cost programs and other federal initiatives, and politics being what it is, Ottawa often responded positively. The result was that, by 2005, a degree of equalization had been built into so many federal programs that it was virtually impossible to know how much money was being transferred from richer to poorer provinces. These programs did, however, reflect the modern reality of federalism, which is the involvement of all three orders of government in many of the programs that assist the nation’s citizens. It was easy, however, to overemphasize the importance of the equalization program because, to a certain extent, it merely balanced the shared-cost programs that always provided more federal money to the richer provinces.
In the early 1960s, two developments converged to produce decades of conflict within Canadian federalism. The first was the Quiet Revolution in Quebec, which saw the government replace the Church as the provider of health, welfare, and education. That made Quebec more like the other provinces where governments handled such matters. Paradoxically, it also made Quebec less like the other provinces because its government was far more determined to ensure that those matters would be handled by Quebec City and not Ottawa. Then, in 1963, the federal Liberals returned to power, determined to complete the federal welfare state through a number of new programs, especially the two most expensive ones: a national contributory pension fund and Medicare. The stage was set for a major showdown between Quebec and Ottawa over power and money. It was also ethnic and religious: who would determine social policy in Quebec, the provincial government dominated by French Catholics or the federal government in which French Catholics wielded little power? Confederation had been designed and adopted to avoid problems like this, and the battles that escalated in the 1960s demonstrated the degree to which Ottawa had successfully invaded “exclusive” provincial jurisdiction, as well as the degree to which English-speaking Canadians agreed with that policy.
The clashes dominated Canadian politics, and while Quebec lost most of the battles, many in English-speaking Canada mistakenly thought it had won most of them. The failure to protect Quebec’s autonomy in its own areas led more and more Québécois to embrace more nationalistic parties and even separatism. English-speaking Canada was moving in the opposite direction, becoming more nationalist and more determined to have Ottawa impose “national standards” on health and welfare and become more involved in “local” matters that were, of course, provincial. One prominent French Canadian, Pierre Elliott Trudeau, saw Quebec nationalism as a force for evil, and when he became a champion of federalism and the darling of the English-Canadian nationalists, he quickly rose to the leadership of the federal Liberal party and then became prime minister.
Trudeau’s first regime witnessed some of the worst battles between Ottawa and the provinces, with Ottawa’s relations with the West deteriorating to the level of its relations with Quebec, where the people elected their first separatist government. In 1980, Trudeau found himself back in power with roughly the same agenda he had started with twelve years earlier. He was determined to add a charter of rights and an amending formula to the constitution, patriate it from Britain, share western Canada’s energy wealth with the rest of Canada, defeat Quebec nationalism, tip the balance of power strongly towards Ottawa, assert Canadian nationalism over any other identities, and reform various aspects of the relationship with the provinces to Ottawa’s advantage. Canada was in for the worst period ever of federal-provincial relations, issues that would dominate politics across the land and produce an entire cottage industry of experts and participants.
The first challenge the country faced was a Quebec referendum on separating from Canada, which was defeated by the wide margin of 60–40. That was followed by two years of fighting, which produced a compromise between Ottawa and the nine English-speaking provinces: the constitution was patriated with a charter and an amending formula, but none of Quebec’s goals were achieved and it refused to sign. At the same time, the attempt to control western energy resources was a failure financially, constitutionally, and politically.
In 1984, Brian Mulroney’s Conservatives swept to power, determined to reverse the federal policies that had placed such strains on the federation. He succeeded with negotiations with the Atlantic provinces and the West but the attempt to deal with Quebec’s major objections to the state of federalism—the Meech Lake Accord—foundered, as did the successor arrangement, the Charlottetown Accord. Fortunately, federalism is infinitely flexible, and many of the main elements in those Accords were later implemented by Acts of Parliament or by agreements between Ottawa and one or more provinces. That was the way most changes had been made before 1982, and the main advantage of the new amending formula was to facilitate patriation of the constitution.
During this period another factor dramatically changed the functioning of federalism. In the 1970s, Ottawa began to run huge deficits to finance all its programs and to buy the hearts and minds of the Québécois. The deteriorating financial situation ended the search for new initiatives in provincial areas of jurisdiction and also led to cutbacks in transfers to the provinces. Though Ottawa attempted to maintain control of the programs and the conditions the provinces had been forced to accept, the provinces knew that a shrinking federal share of the burden meant a shrinking federal ability to call the shots. Over the next two decades, more and more federal conditions were loosened, Canada became more asymmetrical, and relations between Ottawa and the English-speaking provinces improved. By 2000, Medicare was almost the only shared-cost program in which Ottawa could impose conditions on the provinces, and the other programs have run relatively smoothly ever since.
In the mid-1990s, Canada approached its worst crisis ever. The Parti Québécois was back in power with a Quebec government determined to secede as soon as a referendum could be held. The No side was now weaker politically at both the provincial and federal levels, and arguments that had helped to defeat the separatist referendum of 1980 were no longer of value. Panic on the eve of the vote forced Prime Minister Jean Chrétien to reluctantly promise two of the main features from the defeated Meech and Charlottetown Accords—restoring Quebec’s veto and recognizing it as a distinct society. The No side won a narrow victory, and Chrétien restored the veto and recognized Quebec as a distinct society through legislation, since constitutional amendment had become virtually impossible.
Chrétien had the federal government withdraw from a number of areas of provincial jurisdiction and took a number of steps to make separation much more difficult. These measures, coupled with the loss of the two referenda and their best leaders and the emergence of a new generation of Québécois, produced a steady decline in support for separatism. Canada finally lapsed back into a peace on the constitutional front not seen since 1960. After 2006, Prime Minister Stephen Harper took a number of steps to improve the state of the relationship, including addressing the “fiscal imbalance” and recognizing the Québécois as a nation. The federal election of 2015 then produced a new Liberal regime promising to make even more improvements to the functioning of federalism. If implemented, the 150th year of Confederation could be one of the most harmonious ever.
As Canada celebrates the 150th anniversary of Confederation, federalism is functioning very well compared to its historical record, possibly better than at any time since 1911. One only has to look back on the problems that bedevilled Canada in the past to note that there are no such problems on the agenda today. Sir John A. Macdonald’s attempt to turn the provinces into municipalities was a complete failure, and they are much stronger now than they were in his day. Federal powers that could be used against provinces, such as that of disallowing provincial legislation, have long since been abandoned. There are no international wars on the horizon to turn the country back into a unitary state, but the constitution is sufficiently flexible to allow that to happen if necessary. Co-operation between Ottawa, the provinces, and the municipalities to deal with the 2008 recession was a model for federalism, especially compared to the decade of squabbling, buck-passing, ideological intransigence, and failure that passed for governance in the Depression.
The fiscal imbalance that the Fathers bequeathed the provinces, the problem that led to so much conflict for over a century, was resolved by the Harper government, and the current government’s promises of support for provinces and municipalities are based on a plan to borrow rather than the disposal of excess revenue. The main cause of federal-provincial friction was power as federal politicians and bureaucrats sought to dominate the provinces. By 2015, however, it appeared that the politicians and bureaucrats in both orders of government had come to the conclusion that co-operation was more desirable than confrontation and that they all had sufficient challenges to absorb all their time and money. Time will tell how long the current balance and relationship between Ottawa and the provinces will last, and what changes lie in the future. History provides good grounds for optimism; it also provides much evidence that the future cannot be predicted.