or the population, because if they succeeded, they became net contributors, and if they failed, they were no affair of the state.
Canadians today, used to thinking of themselves as more caring and sharing, and just altogether “nicer” than, say, our American neighbours, may be shocked to learn that this failure to use the state as a way to support the poor was not an oversight, and even less was it a matter of waiting impatiently until the country was rich enough to pay the bill. The very idea of the state acting so as to relieve people of responsibility for their own choices and actions was anathema to the entire political class.
No one was interested in the devices which a later generation would call the “welfare state” . . . Neither Canadian governments nor the fashionable “reformers” were much interested in sickness insurance, old-age pensions, disability insurance, or unemployment insurance (not to speak of day-care centres!). Imperial and undemocratic Germany had provided sickness insurance and old-age pensions since the 1880s. Britain introduced such pensions, and a form of health insurance, in 1911, and New Zealand had already done likewise. These examples were not followed.18
Laurier’s objection to such schemes, like that of his Liberal colleagues, was one of principle: when people were expected to take responsibility for themselves and their family, they made better provision for their needs and directed their productive efforts where they would do the country and themselves the greatest good. When this natural necessity to strive was diluted by an easy access to the public purse, the ever-present danger was of the enervation of the individual and the stagnation of the progress of society. “If you remove the incentives of ambition and emulation from public enterprises”—by which he meant the economic undertakings of individuals and businesses, not state enterprise—Laurier said on the subject in 1907, “you suppress progress, you condemn the community to stagnation and immobility.”19
That individuals and families might occasionally need help to overcome the vicissitudes of life went without saying, but the appropriate institutions to deal with these hardships were ones that the community generated quite successfully itself, and no one in government saw any need to try to supplant the efforts that communities and families made together to protect themselves from the shoals and reefs of the human condition, such as illness and unemployment.20
2. Limited government, light taxes, and fiscal discipline
The second element of Laurier’s plan was based on the view that once freedom, the rule of law, and key infrastructure had been created, the best thing that government could do was to then get out of the way, to keep taxes and rules to a minimum. Indeed, Laurier believed that the cost of government, and especially the tax burden, needed always to be kept below the level in the United States, so as to create a powerful competitive advantage for Canada. Small but efficient government, not big government, was, to Laurier’s way of thinking, Canada’s secret weapon in the competitive struggle with America.
Even beyond the absence of the welfare state, it may surprise many Canadians today the extent to which this belief in lean minimalist government in economic terms was also an article of faith for most of the first century of the Dominion’s existence. Indeed, one of our leading historians of Canadian tax policy, David Perry, of the non-partisan Canadian Tax Foundation, points out that this consensus was assumed by its drafters to be part and parcel of the plan that inspired the British North America Act, later rebaptized the Constitution Act, 1867. In that document’s scheme, both the major responsibilities and the major sources of revenue were granted to the central government in Ottawa, but the plan was not to create an expansive and activist government. Rather, it was to ensure that no government got too big for its britches by keeping them all, federal and provincial, on a meagre fiscal diet.
The prevailing assumption in 1867 was that government should be unobtrusive and cheap. Its job was to prepare an environment in which private enterprise could thrive, and then stand to one side. So, although the federal government was to be stronger than the provinces, it was not to be very strong, or very expensive, in its own right.21
Today Canada’s prime minister is excoriated in the press for suggesting that there are no good taxes;22 the country’s founders saw this view as unexceptionable. Sir Richard Cartwright, finance minister of the young Dominion in 1878, thundered during his budget speech to Parliament that
All taxation . . . is a loss per se . . . it is the sacred duty of the government to take only from the people what is necessary to the proper discharge of the public service; and that taxation in any other mode, is simply in one shape or another, legalized robbery.23
Politicians stayed as far as they could from directly providing services or competing with private enterprise. They did not think it their job to provide what businessmen with proper incentives could do more cheaply and efficiently, while the voters wanted no truck nor trade with government masquerading as business, or even any expansion of the role already played by the state. As one set of historians of the time wrote, the public, “regarded ‘national services’ like the Public Works Department, Post Office, and Intercolonial Railway, all of them believed to be sinkholes of patronage, as painful necessities that ought not to be duplicated.”24
Laurier believed that we lived in a world in which people and societies compete for the most desirable things—whether they be immigrants, industry, or capital—and that Canada could not win that competition by trying to throw up walls against it. Instead, the winner of the competition would be the country that proved most open and hospitable to these footloose forces. A vital part of his plan, therefore, was to find a way to create a distinctive set of Canadian advantages that would help the young Dominion win the competitive struggle with others, including the United States. Again, this preoccupation of Laurier’s has an arrestingly modern feel to it.
As already noticed, in the early years of Confederation, Canada was the destination for a goodly amount of immigration, but our country too often proved to be only a way station for many of the newcomers, who slipped south of the border in search of better opportunities.25 And in this vast, empty country, people were wealth; it took strong hands and stout hearts to bring European civilization to the new Dominion’s empty spaces.
Governments, however, could not affect many of the factors that favoured one part of North America over another. If America enjoyed a more attractive climate, for example, or longer-established industry and infrastructure, there was little the government of Canada could do about it. Taxation, on the other hand, was something they controlled absolutely. In the battle to win a disproportionate share of people and industry for the Dominion, taxation was to prove a recurring and powerful theme.
Competition for these mobile human resources, not to mention the capital with which these immigrants (be they farmers or businessmen) arrived, was fierce. Consequently, all Dominion governments were determined to keep their taxes low.26
No one displayed this determination more doggedly than Laurier.
Beyond rewarding energy and what we would today call entrepreneurialism and innovation, Laurier was deeply concerned that taxation that was too high, relative to the next-door neighbour’s, would create a vicious circle in which loss of people and investment led to loss of revenue, which led in its turn to higher taxes and so forth.
References were made [during the Laurier era] to the relative tax burdens between the two countries as an important political constraint. The economic loss of people and their resources to the U.S. would reduce the revenue bases available for taxation, necessitating higher tax rates or reduced government spending. Thus the potential economic cost of this horizontal tax competition [i.e., competition on tax rates between the two governments] would be reflected directly into higher political costs for the government.27
