Peace, order and rocky government

Dec 1st 2005
From The Economist print edition

Canada's economy is booming, says Peter David (interviewed here). Its politics, as it heads for a second general election in under two years, is a mess

“A CAUTIOUS case can be made that Canada is now rather cool,” this newspaper ventured in September 2003. And it still can. At a ceremony in Ottawa in September this year, Canada invested a new governor-general, the queen's representative in Canada and therefore its de facto head of state. She is Michaëlle Jean, a glamorous black television journalist and former refugee from Haiti. In her investiture speech Mrs Jean declared that the old story of Canada being separated into the “two solitudes” of English-speakers and French-speakers was at last over. Newspapers gushed. A banner headline in the Globe and Mail greeted a “remarkable new governor-general who personifies the free and open country Canada wants to be”.

In the House of Commons this week, a no-confidence vote felled the ruling Liberal government, paving the way for a general election in January—a mere 19 months after the previous one. Nonetheless Canada has many good reasons to feel pleased with itself. Its constitutional motto of “peace, order and good government” may not set the pulse racing in the manner of America's “life, liberty and the pursuit of happiness”. Most Americans probably think of it as a dull old neighbour, when they think of it at all. But peace, order and good government are solid virtues, and still rare enough not only to make Canadians count these blessings but also for millions of people from less orderly places to flock to Canada to enjoy them too.

Uniquely in the rich world, a large majority of Canadians welcome immigration, now running at nearly a quarter of a million a year, and most nowadays from East and South Asia, with only a murmur of dissent (see chart 1, left). Canadians have happily allowed the inflow to transform the ethnic mix and therefore the colours, flavours and rhythms of its cities. More than half of the residents of Vancouver and Toronto are now said to be foreign-born. In Vancouver, Canada's Pacific gateway to China, Martha Piper, president of the University of British Columbia, reckons that half of her university's Canadian—not foreign—students speak a language other than English at home.

Comfort ye

Wealth lubricates the upbeat mood. Fifteen years ago, ballooning deficits and a prostrate economy made Canada look like a candidate for an IMF rescue. That would have been a bitter humiliation to a member of the G7 rich-country club. Against expectations, a Liberal government elected in 1993 under Jean Chrétien turned the public finances around, so much so that Canada is now the only big industrialised country to notch up consistent surpluses both in its federal budgets and in its trade and current accounts. For five years it has had the G8's fastest growth, driving unemployment to its lowest levels for three decades and producing big gains in incomes, profits and tax revenues. In December 2003 Mr Chrétien's finance minister, Paul Martin, won his reward for presiding over all this by pushing out his boss and taking over as prime minister himself.

The present good times are not the product of fiscal discipline alone. Canada has reaped advantages from the free-trade agreement with the United States that came into force in 1989, and the later North American Free-Trade Agreement (NAFTA). More recently, the economy has been supercharged by booming prices for energy and commodities, of which Canada has an abundance. China in particular has a growing appetite for Canada's energy, metals and chemicals. Such exports helped to lift Canada's trade surplus to a near-record C$66 billion last year. Better still, energy prices have been rising just as some vast Canadian energy investments, such as the Hibernia development in Newfoundland, and the so-called oil sands of northern Alberta, have started to come on stream. Although Canada is already the biggest supplier of oil and natural gas to the United States, these new unconventional sources in Alberta mean that dull old Canada now has the world's second-biggest oil reserves after Saudi Arabia.

Three troubling weather systems

Peaceful, diverse, tolerant (in June gay marriage became legal throughout the country)—and with long-term riches to boot. If this isn't “cool”, what is? However, Canada is a massive country by area, the second-biggest in the world after Russia, which means that it has room for many kinds of weather. Look more closely, and you see three weather systems where turbulence and storms are possible.

The first is in the west, the part of the country that benefits disproportionately from the resource boom. Canada is one of the few countries that has seen exports to China soar, by 40% in the past year. In the next few years, economic growth in British Columbia, Saskatchewan and especially Alberta is expected to sprint ahead. But central Canada's manufacturing base is not part of this bonanza. Over time, the country's centre of gravity will begin to tip westward as the west forges closer links with a rising Asia.

A complication here is that the western provinces, and especially Alberta, have also for many years felt remote from and neglected by the federal government. British Columbia, cut off behind the Rockies, is oriented towards the Pacific, with a diminishing interest in what happens across the prairies in distant Ottawa. Alberta-based firms are investing heavily in oil and gas projects in China. Polls by the Asia Pacific Foundation of Canada found that whereas 70% of people in British Columbia and 39% of Albertans think that Canada is part of the Asia Pacific region, only 28% of Ontarians and 20% of Quebeckers agree. Although the resource boom is only just starting, the west's new wealth may place new strains on Ottawa's ability to hold far-flung Canada together.

The second troubling weather system is in Quebec. When the new governor-general says that the “two solitudes” are a thing of the past, she must be expressing an aspiration rather than describing things as they are. As a Quebecker herself since emigrating from Haiti, she knows better than most that separatist sentiment is burning brightly in the province.

Why it still does so is something of a mystery, given how well the French-speaking province has fared within the federation. After a referendum in 1995, in which Quebeckers voted by the narrowest of margins to remain part of Canada, passions seemed to subside. Nonetheless, in opinion polls this past summer, more than half of Quebeckers questioned said they favoured sovereignty for Quebec. Cool or not, Canada could still break up—a prospect that has haunted its federal government ever since Charles de Gaulle's mischievous speech 37 years ago when he called for a free Quebec.

The third weather system coils along the 5,500 mile (8,900km) border with the United States. Although relations with America have survived many ups and downs, the past few years have seen too many downs. Since September 11th 2001, the Americans have grown twitchier about border security. Trade with the United States makes up around a quarter of Canada's GDP, so the border's closure would be an economic catastrophe. However, managing the unequal relationship with the superpower has lately become more complicated, aggravated not only by a perennial trade dispute over lumber but also by what may be an underlying estrangement in values and politics.

Whether these weather systems will develop into storms, and how much damage they would do, is a matter of conjecture. Canada is a country of ferocious northern winters, whose stoical people are used to battening down their hatches. Besides, some Canadians love nothing better than a storm: every winter tourists flock to the beaches of Vancouver Island expressly to watch them lashing in across the Pacific. But managing the turbulence will require both luck and political skills of a high order. This survey will describe the three systems in turn, and then ask whether Canada has agile enough politics, and a robust enough economy, to weather them unscathed.

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