Rethinking Canada for the 21st Century
Notes for an address by The Honourable Paul Martin, Minister of Finance of Canada, at the 67th Annual Couchiching Institute on Public Affairs Summer Conference
August 6, 1998
Delivered text is official version.
Let me begin by extending my sincere thanks to this weekend’s organizers for the invitation to join you as your keynote speaker. It is a great honour. The historical contribution of Couchiching to public policy discourse within Canada is – I think it is fair to say – unmatched.
For more than 60 years, this has been where the most experienced and most expert gather to exchange views. This is where the great issues of the day are discussed and debated. And, of course, this is where guest speakers find their most informed and – no doubt – most challenging audiences.
Beginning in 1936 my father spoke here four times. As an M.P., a Parliamentary Secretary, as the Minister of Health and Welfare, and finally, as the Secretary of State for External Affairs.
You will notice however, that he never came as the Minister of Finance and no doubt he would be aghast to learn that you had invited one here today. He would not regard this as a sign of progress.
I was asked to speak on “Governing Canada in the 21st Century” – a topic tailor made for Couchiching – ambitious, complex and important.
Indeed, on the eve of not just a new century but a new millennium, it captures precisely the kind of questions we should be asking ourselves.
What sort of nation do we seek to build? What are the great forces of our day that will shape our tomorrow? How will we build upon the quality of life that Canadians enjoy?
Now, some here may be surprised that one of those questions is not about the current behaviour of the Canadian dollar. Let me say that I am far from indifferent about what is happening to our currency. What is happening simply does not reflect the true economic picture of Canada.
However I was invited here to discuss the longer-term view and, since 1993 we have been successfully following a plan to strengthen the Canadian economy and Canadian society.
The results are clear: there has been strong economic growth and job creation; the deficit has been eliminated; the debt to GDP ratio is on a steady downward track; investment is strong; of great significance, productivity growth is up, in fact the best it has been in over a decade; and we have started the process of reducing taxes, a process we intend to continue.
In short, as a result of the actions of Canadians, the stage is set for a stronger Canada, now and in the 21st century.
One thing is sure, it is only by taking the long view, by having a plan and sticking to it, that we will build a better future for the Canadian economy and Canadian society.
But that’s not where I want to begin.
I would like – somewhat perversely – to begin at the ending.
Rather than describing the circumstances of the present and then debating where they might take us in the future, I will attempt rather a suggestion as to the kind of future we should seek to build and then discuss how to shape our circumstances to suit that ambition.
Given, as I mentioned that my Father spoke here four times over a twenty-eight year period, I thought it might be interesting to cast tonight’s discussion in the context of what Canada might look like when I deliver my fourth address to Couchiching twenty-eight years from now.
This you will recognize as a somewhat unsubtle hint to the speakers’ committee.
In the year 2026, what will our country look like? Or – more to the point – what should it look like?
Well first – the business cycle with its ups and downs will not have been abolished, nor, unfortunately, will shocks to the system – the result of global economic integration – be a thing of the past.
Having said that, Canada will be a nation of abiding prosperity.
In terms of skills and productivity, our workforce will be the envy of the developed world. We will lead our trading partners in the creation of jobs and growth by building more than our fair share of the great value-added industries of a day that is yet long off.
Our middle-class – the backbone of any country – will be expanding; family incomes will be rising; and – importantly, this prosperity will touch all parts of our country. From Victoria to St. John’s, in Chicoutimi and in Chatham. As a result, Canada will be a strong and united country. One where shared success and mutual optimism will have marginalized the cause of Quebec separatism and joined all Canadians in a common sense of national achievement.
Canada will boast a social infrastructure that is without compare in terms of its progressivity. Health care that is universally accessible will remain as an enduring symbol of our values. More than that, it will have evolved to meet the needs of a changing population and a changing technology.
Well into the retirement of the baby boomers, we will have secured the best public pension system possible.
And looking to the future, we will have created a network of support that will make today’s increasing rates of child poverty an unpleasant distant memory.
There are as well other important observations that one should make about Canada in the year 2026.
The economic and social blight that afflicts our Inuit, Metis and Indian peoples will have been largely replaced by an optimism in a future of equal opportunity.
Environmental indicators will form as fundamental a measure of our success as do the economic and financial ones today. In short, sustainable development will be a widespread practice – not just a widely praised concept.
The heart of Canadian culture will beat strongly in our works of art, our music and our film – stories told by Canadians and for Canadians but which also will be sought eagerly by those around the world in a living and breathing expression of our nation’s soul.
And finally, we will accomplish all this while maintaining our commitment to sound fiscal management.
Our debt-to-GDP ratio will have long since declined past the point of any concern and our taxes will be competitive with those of any industrial country.
Now, to those who roll their eyes and dismiss this portrait of our future as a Utopian dream, mark my words: there will be a great nation in the year 2026 and it will look like the one I have just described.
Whether or not, however, that nation will be Canada is up to us – up to the ambitions we set for ourselves today and the rigour with which we pursue them over the next number of years. How do we ensure that this future turns out to be ours?
The answer of course demands a response that in terms of its breadth goes much beyond that permitted by the thirty minutes that have been set aside for my opening remarks.
Part of the answer however does lie in defining the appropriate role of the national government – the subject that you have asked me to address.
Indeed, I would like to be even more specific by focusing my comments on the role of the state as conditioned by the ensuing era of globalization – an era that many feel will render national governments increasingly irrelevant.
In short, I want to challenge the myth that as globalization takes hold, the ability of national governments to act positively in the furtherance of their peoples needs and ambitions must wane.
Globalization – the emergence of a single world market for goods, services and, as importantly, ideas – is clearly transforming our lives and our livelihoods. It has in fact, been doing this for a very long time.
It was felt at the end of the 1800s with the laying of Trans-Atlantic cable, and seen centuries ago with the establishment of the mercantile navies of the English, French, Dutch and Portuguese. Western missionaries extended the reach of an exported set of beliefs and ideas to virtually every corner of the world long before Karl Marx or Nicholas Negroponte.
What distinguishes these earlier manifestations of globalization from those of today is the startling leap forward that has occurred in our technological capacity.
A new world of quicksilver communications coupled with the architecture we have fostered to support international trade, lend it a reach that is pervasive and an impact that is instantaneous.
Let us be clear: this creates many exciting opportunities.
Open economies experience growth that is faster and that reaches higher than those closed to the rest of the world.
Greater innovation, improved productivity, and higher incomes all flow in the wake of open trade.
For a nation such as Canada – with such a small domestic market – the ability to penetrate economies elsewhere – to sell our products, our services and our ideas – is key to a prosperous way of life.
The problem with globalization – if I may coin it as such – is that it appears to have given rise to a market that outstrips the power and values of national governments.
The result is increasing anxiety on the part of populations everywhere. People have come to fear that they are losing the capacity to shape their own destiny because they feel hostage to forces over which they have no control.
Their confidence in the future is shaken by the suspicion that their national governments have no more ability to shape these forces then they themselves do as individuals. This is not so.
But in the absence of a competing vision, it threatens to become a self-fulfilling prophecy.
Let me repeat something I said in the last budget: globalization is a fact. It is a reality. But it is not a faith. It is not a religion. And we commit a very serious mistake if we ever come to believe that there is no role, no responsibility on the part of the national government to provide opportunity and security at home.
What is the role of government in the 21st century?
The answer lies within both the international and domestic fora. Internationally – among other things –it is to establish the rule of law in all areas where the reality of global economic interdependence threatens domestic stability.
For example, over the course of decades we have established agreements that foster the movement of capital and goods with fewer restrictions and with greater speed than ever before. We have built institutions that protect the interests of trade. This is good.
But now we must strengthen those institutions that are intended to protect the interests of people.
Clearly, these must include those that protect human rights and the environment. Also important are those that restrain the commercial and financial excesses of the market. Let’s just take the most obvious example.
The recent experience in Asia illustrates graphically the key role that the failure of financial institutions play in the spread of economic pain.
Indeed, imprudent banking practices are the common thread that weave together such otherwise disparate examples as Mexico, Thailand, Indonesia, Korea and – most recently – Japan.
The problem is the combination of imprudent domestic banking practices and globalization ensures that in each and every case, the fallout is felt not just in the country of cause but around the world as well.
Wherein lies the solution?
Ironically, the means to combat and manage these crises can found in the tools created by national governments decades ago.
Even the most libertarian among us has long since acknowledged the need for banking regulation, for securities commissions, for combines legislation and other such instruments to protect individuals from the excesses of an unfettered market.
Given that these tools are welcomed within our borders, by what logic would we not seek their development beyond them? Why would we build an international model that has all the market freedoms of our national economies but none of its protections?
Smaller countries like Canada must act through multilateral means to strike the same balance internationally that we have determined is necessary at home.
* Through more sophisticated oversight of all financial activities.
* Through a stronger set of international rules that will protect the interests of people everywhere.
National governments must turn their attention from making globalization happen to making it work. To lead a march to the top rather than getting trapped in a race to the bottom.
Domestically, in terms of the role of government, the course must also be reset. For many, the debate over the prerequisites of a successful economy is over.
In 1998, when the Ministers of Finance of the world gather together, the consensus is startling. An orthodoxy has emerged as to the desirability of low inflation, balanced budgets, less debt and lower taxes.
Where the debate now lies and where it will intensify in the years to come is between those on the one hand who believe that this is all we can – indeed all we should do – and those on the other who believe that sound financial management – while a given – is the very least that ought to be asked of a national government. You can count me firmly among the latter.
For the same reason I would advocate action internationally – because the forces at play if left unchecked will exact an unacceptably high cost on our people.
For instance, at the heart of globalization lies an inherent bias toward inequality. The immediate availability of virtually unlimited choice means that we are creating a world where the best will do very well but where second best will fall far, far behind. This cannot but exacerbate the existing disparity between a small number of winners and everyone else.
Consequently, it threatens to turn ours into a rigid society of haves and have-nots.
And we’re not just talking about the difference between Wayne Gretzky and a journeyman hockey player. Look at the income gap between unskilled workers and those employed in the growth industries and ask yourself whether it is likely to narrow or widen in the years to come?
Then ask yourself if the number of Canadians employed in such value-added jobs is more or less likely to rise with a government that insists its only responsibility is to mind the balance sheet. The answer of course is that successful governments will have to do much more.
The great nations of the 21st century will be those who recognize the incomparable value of a vibrant and expanding middle-class.
One where the gap between rich and poor is always narrowed. Where the mainstream is constantly widened. Where the quality of life is lifted for all so that even the most vulnerable among us can be assured of a better future.
How do we facilitate the growth of this middle-class? First – to be sure – we must avoid the financial constraints that have indebted us in the past.
If we hope to attract investment and opportunity, we can ill afford to lag behind the rest of the world in maintaining sound economic fundamentals. We will keep our taxes competitive. It makes no sense to facilitate education and then overtax the individual on the investment made. We will bring down our debt-to-GDP ratio.
But by 2026 high deficits and heavy taxes will be yesterday’s fight. The battle between the most successful countries will be waged on higher ground.
The pace of the new economy will not slow in the years ahead. It will only accelerate. To stay ahead of its wake and to harness its opportunities will demand maximum flexibility and adaptability on the part of national governments.
That is why we must strengthen and renew the institutions of support that define us as a caring society. Not only because they speak to our values as a compassionate nation – but because they offer an incomparable advantage in managing the impacts of change.
Those on the far right trot out a series of arguments why strong social programs cannot be sustained. They tell us that in an era of globalization they represent a cost we cannot competitively assume and that they mask real-world consequences and thereby lead to lower productivity.
In my opinion, not only are these arguments flawed, they fundamentally miss the point. The fact of the matter is that universal access to high quality medical services – for example – is key to realizing our full potential as individuals and as a country.
No one can take on the challenges of the new economy while preoccupied with the availability of basic care. No parent of an ill child. And no child of an aging parent. Medicare. Employment Insurance. Public pensions. Individually these each address a critical need. Collectively, they form a foundation of personal security – a platform for greater achievement.
To those who argue that social programs destroy incentive, I would reply that, if we are going to ask Canadians to stretch for the opportunities at the top of the ladder, then we have a need to provide a strong safety net should they fall. Why?
Because we want them to climb back up. We want them to try again. And to keep trying. Until they succeed.
How will we build that ladder? – the ladder of opportunity.
Now and in the future, we must inspire a culture of excellence that pervades every aspect of our endeavour. A commitment to innovation and achievement that extends to every walk of life.
Our objective must be excellence itself because excellence creates its own potential and leaves Canadians best positioned to compete and succeed in whatever arena they are interested.
Quite simply, the acquisition of skills and knowledge forms the essential infrastructure for all that we seek to accomplish.
Of course we will continue to develop the resources that lie buried deep within the ground. But more than that, we must develop the skills and the talents of those who walk upon it.
This will mean many things, but at a minimum, it will require of governments that they find ways to make available post-secondary education, vocational training, and importantly – life-long learning.
All the tools associated with self-improvement more affordable and more accessible.
So too we must invest in the infrastructure of innovation and excellence in our schools, and in a world class system of research and development that attracts private investment and creates the intangible synergies from which progress emerges.
That being said, not everyone in the 21st century will be an engineer of a software designer. Nor will everyone need to be.
That is why – most importantly we must remain faithful to the principle of equal opportunity. The premium placed on knowledge makes it increasingly difficult to gain access to the ladder of opportunity through any means other than higher learning.
In the twenty-eight years to come, we know that this trend will only accelerate.
Therefore, while government must focus on the engineering student at Waterloo University, so too, it must help the humanities major at Sir Wilfrid Laurier University. And so too, it must remember the unskilled worker whose formal education is limited and whose means are few.
The single mother who had to leave school to care for her child, the fifty year old factory worker whose job was restructured out of existence. Those for whom the inaccessibility of the new economy encourages withdrawal. We must not allow their potential to be lost.
Even more to the point, years of study demonstrate that their children are quite likely to continue down the same path – laying the foundation of a permanent underclass of unskilled, workers with little hope for advancement.
We must break the re-occuring cycle of child poverty.
We know that basic literacy has no equal when it comes to determining future prospects. We know that dependable assistance to the parent will almost always lift the possibilities of the youngster. And we know that early childhood development is of immeasurable importance.
The challenges of child poverty might not often get raised in the context of preparing for the information economy but they are every bit as fundamental to our future success
as wiring the workplace or building new labs.
The challenge is clear. We must expand the reach of our investments in education to all Canadians. To target in the design and delivery of our programs not just the most promising but also the least fortunate.
Another important example of how our perspective must change is in recognizing the value and legitimacy of the social economy – the work that goes on within our communities. The jobs that are created within the voluntary and social services sector.
These are the people that are on the front-lines of the battle against inequality. Their intervention is often the only chance we have to make a difference in the life of a troubled youth or in putting someone back on the track to employment.
Inexplicably, however, too often we dismiss the skill-sets associated with such vocations. We structure employment programs and apprenticeships away from these jobs.
In the future, as part of a truly integrated and comprehensive attack against disparity, as part of a balanced approach toward a more prosperous future, this too will have to change.
In summary then what we are really talking about – whether it is expressed in terms of stronger financial supervision internationally, or the social economy at home is the need to constantly redefine the role of government.
Multinational corporations have not hesitated to restructure and refocus themselves to deal with world-wide change. Similarly, NGOs have succeeded in adapting their practices to meet new realities.
Only national governments – rigid in their organization and unbending in their perspective – risk being paralyzed by the prospect of globalization. Only national governments have been willing to conclude that sacrificing sovereignty is somehow preferable to renewing and redefining it. This is the laziest answer of the least courageous and the most unimaginative.
The fact is that the room for national governments has never been greater. Their role might change and the focus might shift but their fundamental obligation will remain resolute: to protect the interests of people.
In the 19th century, classic liberalism told us that it was against the oppression of the state that the interests of the individual had to be defended.
In 20th century Canada this was reversed as the tools of the national government were employed to support the objective of equal opportunity.
In the 21st century national governments will be asked to extend the use of these tools still further by mounting the defence of their citizens’ interests not just at home but abroad as well. To impose human values in that crease between borders where protections are few.
The single world market does not trade in the currency of individual needs. Only governments will recognize their inherent worth. Only governments will fight on their behalf.
Thus, we return to your question: what will it take to govern Canada in the 21st century?
Sound financial management. Strong social programs. A culture of excellence. It will take all of these things.
But above all else it will take a determination to adapt and assert a bold new vision for government itself.
To stretch and to bend our structures. To build them up. To build that great middle class. To do whatever it takes in the struggle against inequality.
Whatever it takes to recognize what the market will not: that the wealth of a nation is not measured simply by the output of its economy but by the quality of life it provides for its people. All of its people.
That is the standard to which we should hold ourselves for the future.
That is how we will create the great nation of the year 2026.
That is how we will govern Canada in the 21st century.