Business

Separatism may scare businessmen, but it’s the socialism that terrifies

PETER BRIMELOW November 29 1976
Business

Separatism may scare businessmen, but it’s the socialism that terrifies

PETER BRIMELOW November 29 1976

Separatism may scare businessmen, but it’s the socialism that terrifies

Business

The aftermath of the Parti Québécois’ election victory found the Canadian business community fervently imitating the action of Alberta’s young pronghorn antelopes, freezing when danger threatens into a protective immobility so total that only their eyes move, wildly, as hunters drop the net over them. The abrupt materialization of a separatist government, despite all warnings, came as a profound shock. “We made book in the office,” reported an executive of one major Montreal-based manufacturer, “and no one bet on anything worse than a Liberal minority.” T. J. Bell, chairman of Abitibi Paper Company Ltd. which has extensive Quebec interests through its purchase of Price Company Limited in 1974, had five dollars saying that the Liberals would get 67 seats (he was one of the few businessmen to admit publicly that the result “appalled” him). But it was the PQ’S socialism rather than the threat of its separatism that was arousing most alarm. “Dave Barrett wasn’t a patch on these guys,” shuddered one Montreal corporate head, who was anxious not to be quoted, voicing a widespread fear of the men behind the respected Lévesque and his ability to control them.

Apart from their normal mixture of caution, reticence and acute fear of government retaliation, much of the Canadian business community with interests in Quebec really had little to talk about. Shortterm, their options are very limited. Noranda Mines Limited cannot uproot its mines. Many larger corporations, such as Canadian Pacific Limited, with head offices in Quebec, are believed to have contingency plans for evacuation, although some have apparently been neglected since the FLQ scare of 1970. But for, say, the Bank of Montreal to transform itself into the First Canadian Bank and alight in Toronto (thus confirming the common but much-denied explanation for the discrepancy in size and grandeur between its new Toronto branch and old Montreal head offices) would be an agonizing and risky step. Moreover, the professional managers of large corporations are not enthusiastic about moving. For them, it would represent personal financial tragedy: their savings are largely tied up in houses at a time when the Montreal real estate market is a catastrophe.

There was some movement of money, of course, much of it highly publicized. It is clear, despite soothing denials from the banks, that there was a substantial flight of stock certificates and deposits from Quebec; such border towns as Plattsburg in New York State and Hawkesbury in Ontario reported large numbers of nervous Quebeckers renting safety deposit boxes and opening accounts. Some lawyers received a flood of inquiries from smaller firms, often incorporated in Quebec, who are tentatively investigating the legal and fiscal implications of leaving.

The stock market itself has been subsiding disappointingly for the last few months, but it still managed a sharp downward stab in the two days after the election, mainly due to pressure on Quebec-based corporations. Alcan Aluminium Limited lost more than 10%, apparently because of fears about its contractual access to relatively cheap power in Quebec. Stock brokers maintained brightly that the decline was a temporary emotional reaction, alathough the advent of Barrett’s NDP govern ment in British Columbia led to a similar emotional reaction which lasted for two years. Significantly, the volume traded was not large, indicating that the sellers were small investors who couldn’t find buyers.

What Canadian business can and almost unanimously intends to do about the PQ’S victory, however, is to forestall further investment in Quebec until the situation has clarified. “Our plants will be on a care and maintenance basis; we’ll stop the roof leaking, nothing more,” said one official. Another official confessed he had lost interest in two take-overs in Quebec since the election, because both involved a capital injection. (A rare exception to this pattern is Gary Van Nest, president of Torontobased Triarch Corp. Ltd. Van Nest says his investment company is not “turned off Quebec as a matter of principle—not at all.” But he adds that the increased risk must be reflected in the rate of return.) For Quebec, where unemployment is already 2.5% higher than the national average of 7.6%, this investment famine could quickly become a major problem.

Paradoxically, the deteriorating Quebec economic condition is one factor adding to businessmen’s reluctance to bolt. They cannot believe that the PQ is going to have energy left to harass them. The province already has high taxes, and has been a heavy borrower on U.S. markets. Its financial strength is hotly disputed: some assert that Bourassa called the election precisely because a tax increase was becoming an inexorable necessity. However, everyone agrees the province is in dire need of further cash, both to fund the government’s own one-billion-dollar-plus deficit, and to satisfy the needs of Hydro-Quebec and the James Bay project. To do without would be to risk a slump at a time when private construction, especially for the residential market, is declining and Quebec’s secondary industries, chemicals and textiles, are

involved in a world cyclical downturn. It the PQ seriously interferes with business, it will destroy the confidence of U.S. lenders that their money is being used sensibly. Moreover, the PQ simply cannot afford to expropriate more industries at this point. A variation of this argument has been offered by Jean de Grandpré, chairman of Montreal-based Bell Canada, whose operations in Quebec Lévesque promised to nationalize in 1971. De Grandpré calmly stated that Lévesque’s administrative, technical and constitutional problems in tackling a federal corporation such as Bell were insurmountable: “Premier (Antonio) Barrette made the same commitment some years ago and you know what happened to Mr. Barrette.” (He was defeated by Jean Lesage’s Liberals after only six months as Union Nationale premier in 1960.) The most confident proponent of this point of view is Richard Lafferty, head of Montreal stockbrokers Lafferty, Harwood & Partners Ltd., who is famous (and infamous) within the financial world for trenchant opinions. Lafferty voted for the PQ, and regards their election as “a very healthy contribution ...” that will “flush out vested interests.” He grandly dismisses the PQ’S socialism on the grounds that they can’t afford it and that anyway it would alienate their newly won support from small businessmen and farmers.

However, no such hopefulness can be found among Montreal’s Jewish businessmen. They are thoroughly alarmed. “I’m a triple minority,” says one, “anglophone, capitalist and Jewish.” Whether because of traditional distrust of French Catholics, or because of alleged contacts between separatists and Arab groups, they are skeptical of assimilation even when fluent in French. This, rather than capitalist manipulation, seems to be the explanation for subsequently moderated threats made by Charles Bronfman, president of Seagram Company Limited, to withdraw his firm if the PQ won. Speaking before a Jewish audience, Bronfman compared the election to the 1973 Yom Kippur War: “They’re a bunch of bastards trying to kill us.” Ridings with large Jewish populations remained notably loyal to the Liberals.

Foreign reaction to the threat of separation has been surprisingly mild, with no really exceptional pressure yet on the dollar or Canadian debt instruments. “I was talking to a client in Hong Kong when the result came up on the TV screen,” said one Montreal stockbroker. “So I told him, and he said, ‘Does that matter?’ ” “We work in 100 countries,” said a Toronto-based American banker, “and we view it as just another government.”

In Montreal, however, every hopeful impulse has a countervailing pessimism. No matter how tight the PQ’S financial straitjacket, it promised its labor union supporters a great deal and is absolutely required to deliver. Even if the PQ’S current vote is really anti-liberal, “possession is nine tenths of the law,” says one observer, “There’s a lot they can do to fix the outcome of any referendum.”

Just as in British Columbia in 1972, the Montreal business community finds itself confronted with a new governing class of which it knows nothing. Where a member is recognized, like Guy Jordon (PQ-Mille lies), who was once a stockbroker and whose father held an interest in Independent Petroleum before it was sold to Texaco Canada, he is hailed with joy. But in a city largely built by their business civilization, surrounded on all sides by monuments to their wars and commercial endeavors, the English of Montreal feel they are faced with the long-term possibility of the same fate that has left in the hands of strangers the Georgian mansions of the Anglo-Irish, the White Highlands of Kenya and, across the world, the artifacts of a vanished supremacy.

PETER BRIMELOW