THE NATION’S BUSINESS

The sheer foolishness of Quebec separatists

We must not allow the Parti Québécois to finance the breakup of Canada using Canadian dollars. No way.

Peter C. Newman May 23 1994
THE NATION’S BUSINESS

The sheer foolishness of Quebec separatists

We must not allow the Parti Québécois to finance the breakup of Canada using Canadian dollars. No way.

Peter C. Newman May 23 1994

The sheer foolishness of Quebec separatists

THE NATION’S BUSINESS

We must not allow the Parti Québécois to finance the breakup of Canada using Canadian dollars. No way.

PETER C. NEWMAN

The best way to combat the ditzy dreams of Lucien Bouchard and Jacques Parizeau is to show that even if our current state of political grace may not smell very sweet, their separatist alternative stinks.

It’s one of the supreme ironies of the Quebec movement for independence that its leaders intend to finance the breakup of Canada using Canadian dollars. That must never be allowed to happen.

During his western tour, Bouchard was very specific: “We already have 24 per cent of the Canadian currency circulating, and we’ll keep it,” he told anyone who’d listen. “That’s our money, and we’ll use it. Nobody would want to see Quebecers dumping $24 billion on the market—it would be a terrible blow to the currency.” Parizeau expressed a similar view to Peter Gzowski on Morningside, stressing that the future monetary union of Quebec and Canada will “be an important guarantee of economic stability.”

No way.

Even if English-Canadians felt mutton-headed enough to consider sharing our currency with the newly created political entity that had destroyed our future as a country, it is quite simply impossible for two major sovereign states to share a single currency. Panama and Liberia use the American dollar as official tender, but their balance of payments positions are so poor that no functioning monetary union actually exists. Similarly, the nine former French colonies that combined their monetary destinies by forming the West African Monetary Union in 1948 have since had to impose foreign exchange controls to prevent capital flights. The world’s only functioning monetary union is the partnership between Belgium and Luxembourg, but the tiny principality’s population is only four per cent of Belgium’s, and since it regularly runs budget surpluses, the postage stamp kingdom has felt little policy restraint. The great experiment in forging a monetary union has of course been

the attempt to negotiate a common currency within the 12-member European Community. Paradoxically—and it proves the point why Quebec and Canada couldn’t copy their example—that step has forced member countries to move towards a high degree of political integration. Whether or not monetary union will work remains uncertain, but if it does it will be at the cost of individual independence.

The 1991 Maastricht Treaty that set down the matrix for European monetary union also made it very clear that this will mean the loss of not only monetary but fiscal autonomy for the dozen member states. That’s why the treaty’s approval had such a rough ride in Denmark, the United Kingdom and Germany. If the partners implement the dramatic pact, the end result will be a political, economic and sociological European union not that different from Canadian Confederation. That’s what we have now, so it hardly seems worthwhile for Quebec to separate while insisting on a common currency—if the ultimate consequence of maintaining a joint dollar will be to evolve into a new Canada that operates much like the old one.

Not only do Canada’s 10 provinces form a functioning economic partnership, but existing trade flows show that Quebec sells more

of its products to the rest of Canada than it does to the balance of the world. Canadians left behind in a split-apart country would not likely place much emphasis on perpetuating that access. At the same time, the new Bouchard-Parizeau republic would not necessarily gain access to the North American Free Trade Area—especially since Canada holds veto power over the admission of new members.

It’s a significant reflection of how weak the separatists’ argument really is when they concede Quebec’s economy will need propping up by the Canadian dollar, even though they know that such an arrangement would fatally weaken the new French-Canadian state’s independence. “Simply put,” stated a Royal Bank study, published in 1992, “there is no realistic possibility of two truly sovereign states sharing the same currency while exercising independent control over the monetary, fiscal and other economic policies that underpin that currency. A nation’s currency is one of the most basic expressions of its existence. It is the common unit of value and the form in which most people hold savings. Without the political unity to inspire confidence in our currency, few investors, either foreign or domestic, would choose to hold Canadian dollars or securities.”

The idea that Quebec and Canada could somehow run the Bank of Canada together is absurd. It would mean that the new Quebec republic could not control its own monetary (and economic) policies. Because both new countries would be severely weakened by separation, interest rates would inevitably rise with all the damage they inflict on consumer and corporate buying patterns. There would, at least in the initial stages, not be sufficient funds flowing into the country to pay the annual $41 billion interest on our federal debt, no matter how it’s divided. (And that figure doesn’t include the interest we owe on provincial and municipal debt). That would set off just the kind of high-risk foreign exchange crisis that would attract the attention of the International Monetary Fund’s emergency measures squad. Pension funds would be among the hardest hit, but every aspect of Canadian and Quebec economic life would suffer—in terms of dramatic decreases in living standards (the Royal Bank estimates at least a 15 per cent drop for all people living in what is now Canada), as well as decreases in personal income (about $10,140 per family) and higher unemployment (15 per cent, or another 720,000 jobless) by the end of the decade.

The Royal Bank also predicted that at least 1.25 million Canadians, sensing the loss of opportunity, would emigrate to the United States after separation. As is always the case in such an economically inspired exodus, we would loose our best and brightest.

The Royal Bank document summed up the case against a common currency with brutal candor: “If two countries share the same monetary, fiscal and other essential government policies, then neither country is truly independent.”

So why bother?