I began writing this book, I was drawn to the argument that the most important change in the post-war period, and what made Canada particularly vulnerable to this new ideology of social welfare, was our rapidly faltering confidence in the ability of the economy to absorb all our children. But the more I dug into it, the more I realized that this was not enough of an explanation either. Not only had we faced similar waves of job-seekers before (as in the post-war period) but we had also met and mastered depressions and bouts of high unemployment without abandoning our principles. While our Boomer generation was the largest among the industrialized countries, America was not far behind, and it too had to expand universities and schools and other new infrastructure and institutions to manage the wave of youngsters. It was their president who said “We are all Keynesians now”42 and that same president (a Republican to boot) introduced price and wage controls well before Ottawa did. European countries that did not experience anything like North America’s post-war baby boom did, however, expand the size of their governments and welfare states significantly. Clearly you could have the boom without the massive expansion of government and particularly the welfare state (Australia and the United States), and you could have the expansion of the welfare state without any real boom at all (much of Western Europe).43
In any case, the rapid unfolding of the expansion of the welfare state and the dependence it brought in its train from about 1968 or so didn’t match closely enough the rise of the Boomers in the workforce. It didn’t match the economic cycles that might have been the giveaway of a Keynesian-inspired coup d’état. There had to be something else that suddenly supercharged what otherwise had been a rather lazy drift to expanded government in Canada. That something else was the destructive dynamic created by Quebec nationalism that unleashed a bidding war between Ottawa and Quebec City for the loyalty of Quebeckers. That bidding war used rapidly expanding government spending as its chief weapon and had important reverberations all around the country.
The attraction of this argument is only deepened by the regional nature of the growth of government in Canada over the period in question. If we back out Quebec, most of the rest of the country has seen dependency levels that most of the time are not so very different from what we might see in those peer jurisdictions such as the United States or Australia. As I’ll show in later chapters, the exceptions, places like Atlantic Canada or Manitoba, have certainly been drawn into the dysfunction and decline caused by excessive redistribution and the use of political power by organized groups to grant themselves economic and other privileges while preventing economic change. The important point to remember, however, is that they would never have been politically, economically, or demographically powerful enough to cause that increased redistribution and its consequences to happen in the first place. They did not drive the process, and they are only collateral damage from its effects. Quebec remains the key.
WHERE FREE MONEY COMES FROM
As a good friend of mine, the son of a former central bank president, once told me, while still a child he was out walking one day with his father. His father said to him casually, “If you found a $10 bill just lying on the ground with no one in sight, what would you know about who it belonged to?” The boy replied, “Nothing.” He never forgot his father’s reply: “You are quite wrong. You would know one thing with absolute certainty, and that is that it did NOT belong to you.”
Private communication with author
Before we talk about how we lost the political tradition I have just described, it might be valuable to take a moment and reflect on whether we should be happy to have jettisoned it. Maybe it was just tired old ballast that was weighing us down and preventing the emergence of a brighter and more compassionate future. After all, how we react to the story of the birth of the New Canada post-1960 will be conditioned by how we feel about that new country.
Sharing out the Booty
The more I think about the evolution of the New Canada over the last fifty years, the clearer it becomes that the traditional values on which Canada was founded were correct in their view of the corrupting effects of too-powerful government on human character. The difference between then and now is that we have fifty years of evidence about the relative decline of the Canadian economy (both compared to its historic growth pattern and compared to the United States) and of the changing behaviour of Canadians. We also have a burgeoning intellectual tradition that enjoys a lot of success in explaining how our poor economic performance, the growth of government, and certain changes in the behaviour of individuals (things like a declining work ethic and the weakening of the institution of the family) are closely related.
One of the lessons of the growth of the modern state is that, as it achieves a certain size and regulatory power and reach, no one can ignore it; indeed, everyone is brought within its orbit whether they wish to be or not. This happens for three chief reasons.
First, a rapidly growing and well-financed state represents spoils that must be captured and divided. This is the “free money” incentive. Whether you think the state should have this money or not, the fact of the matter is that the state does have it; it is there for the taking. If you don’t get your share, others will get it instead. And since it costs you nothing (once it is in the hands of the state, it is too late; the tax burden you bear is just a sunk cost you cannot change), government money appears to be “free,” like manna from heaven. Who would leave money lying on the ground?
Second, failing to “get your share” puts you at a competitive disadvantage. Even if you prefer to mind your own business and just do your own thing, you cannot. If trade unions are going to lobby the state for special powers (such as laws forbidding replacement workers), companies need to be there to make sure their interests are protected. If your competitors are going to lobby for special tax breaks or subsidies or trade barriers or tariffs or regulations, you need to get “your share” by being at the table or your taxes will be financing your competitor’s advantages. If others are going to get state-financed welfare benefits or social services, if you don’t get the ones you want, you will foot the bill but get little in return. Everyone is drawn to the state in unproductive activity that is essentially defensive.
Three, human beings have a visceral reaction against what they perceive as unfairness. Most of us are morally outraged if we see someone getting ahead through unfair means, by cheating on a test, or sleeping with the boss, or sycophancy or lying or bribery or exploiting family connections. Human nature being what it is, a surprising number of people, seeing such things going on, feel themselves to be morally entitled to act improperly, and the more widespread the illicit behaviour, the more people will feel that they are chumps if they do not abandon their principles and grab what they can while the going is good. Put another way, the cost of being good is low when the vast majority are good but rises rapidly as larger and larger shares of the population defect from this standard. Once some tipping point is reached, playing by the rules is simply allowing yourself to be taken advantage of, because decisions about who gets what are being taken arbitrarily and on the basis of relative power rather than merit or justice.
On the other hand, unless our character and judgments are disfigured by corrosive and unworthy emotions like envy, we have little quarrel with people getting ahead in economic terms on the basis of merit, which is the application of the principle that people should get out of the economy something closely related to what they contribute. Similarly, on a narrower range of goods (especially those provided by the state and therefore supported by compulsory taxation), generally speaking we don’t quibble too much about everybody getting the same share of desired things (which is just the application of an equality rule). But when the patronage powers of the state become too large and the largesse is distributed according to the preferences
