BUSINESS WATCH

Giving the Yes vote its flesh and bones

The No-vote people now have to justify their willingness to decimate the country’s economy, just to have another run at the Constitution

Peter C. Newman October 5 1992
BUSINESS WATCH

Giving the Yes vote its flesh and bones

The No-vote people now have to justify their willingness to decimate the country’s economy, just to have another run at the Constitution

Peter C. Newman October 5 1992

Giving the Yes vote its flesh and bones

BUSINESS WATCH

The No-vote people now have to justify their willingness to decimate the country’s economy, just to have another run at the Constitution

PETER C. NEWMAN

Up to now, what’s kept the Yes-vote faction in the Great Referendum Debate alive has been the often repeated mantra that the Charlottetown accord may not smell very sweet, but the alternative stinks.

With last week’s publication of that blockbuster study by the Royal Bank of Canada on the real costs to the country of Quebec’s separation, the debate takes on a whole new dimension. It’s the No-vote people who now have to justify their stand—that they are willing to decimate the country’s economy, just for the sake of having another run at the Constitution.

In flat, almost police-blotter prose, bank chairman Allan Taylor spelled out the probable effects on this country by the year 2000 of Quebec striking out on its own. “Our study," he said, “could find no country that has broken up both cheaply and peacefully. It concludes that the cost to Canada would be huge and long-term and that these costs would be paid by people in every province and region for generations to come.” Taylor, who justified his gutsy intervention by pointing out that what’s bad for the economy is bad for his customers (one out of three Canadians), share holders (78,800) and employees (55,351), carefully pointed out that he wasn’t hying to use scare tactics.

He didn’t have to. The figures speak for themselves. With Quebec remaining inside Confederation, we would experience an 11per-cent increase in our standard of living by the end of the decade, through the creation of 2.5 million new jobs. Without Quebec:

• Our standard of living would drop by 15 per cent.

• Personal income would be $4,000 lower on a per capita basis; $10,140 for each family.

• Unemployment would reach as high as 15 per cent, which would add at least 720,000 people to the dismal current total of 1.5 million Canadians already out of work.

• In the face of such economic devastation, an estimated 1.25 million Canadians would

immigrate to the United States, and as is always the case with such an exodus, we would lose our best and brightest.

• The economic gap between the United States and Canada, which is already widening, would become an unbridgeable chasm. Our standard of living would plummet by an astounding 28 per cent below that of the Americans; unemployment would be eight percentage points higher.

In every calculation, the bank makes the most conservative estimate of the economic impact of de-Confederation. “If anything,” states the report, “these calculations understate the economic impact of disunity by failing to take account of the structural changes that would accompany the economic deterioration projected in a fragmented Canada. The potential for economic disaster is real, and it should not be ignored by assuming or hoping unrealistically that a country can be dismantled without acrimony, dissent and economic antagonism.”

The document relentlessly drives home the message that what’s wrong with the Canadian economy has little to do with constitutions, but that if the lack of such a document should split the country, the negative fallout will definitely be economic. One example cited has to

do with the feet that our living standards doubled between 1950 and 1979, yet went up only a pitiful 0.7 per cent in the 1980s. During both those periods we were operating under the same Constitution, but our national accounts were so badly mired in debt by the 1980s that government revenues had to be diverted into interest payments instead of wealth-creating investments.

The most telling section of the Royal Bank study destroys the notion, held dear by Quebec separatists, that even if Quebec were independent, it could operate on the Canadian dollar. No way, according to Taylor. “A wellfunctioning national economy requires a single currency to provide a common unit of value,” he insists, “a highly liquid and safe form of saving and a means for settling accounts effortlessly. Regional application of money-supply control is a technical impossibility. Ultimate responsibility for currency and monetary policy must rest exclusively and unambiguously with the central government Two sovereign states cannot share a single currency while exercising independent political control.”

In a fascinating appendix, the study traces the experience of other countries’ breakups, few of which managed their divorce without civil war or at least some violent incidents. The example that’s always cited as an exception was the peaceful separation of Norway and Sweden in 1905. It’s true that it was peaceful, but one reason for the lack of major disruption was that the two countries had never been nearly as closely integrated as Canadian provinces. Also, the breakup took 20 years to negotiate, the currency union between the two countries didn’t survive, and both economies suffered.

Taylor has the courage to say publicly what most Canadian money men have realized privately ever since the constitutional debate began: that in the current international investment climate, even a politically stable Canada doesn’t rank very high, and an internally divided Canada doesn’t rank at all. Our level of debt is so high that $52 billion a year has to be raised just to keep us out of bankruptcy. That means having to raise $1 billion every week of the year, and the bulk of that paper is sold to foreign investors.

What Taylor didn’t say is that if we don’t get our act together and give those notoriously capricious speculators some good reason for investing in Canada, they’ll flee to safer havens and the sour Royal Bank projections will suddenly look like good news.

There are many well-intentioned Canadians supporting the No option, because they genuinely believe that the Charlottetown accord should be improved. They may be right, but the issue has moved way beyond constitutional niceties. What we’ve got here is the potential for a doomsday scenario, based not on emotion, partisan considerations, or even regional and special interests—but on the cold, harsh world of economics.

The choice is no longer between supporting or rejecting an admittedly flawed agreement; but between voting Yes for prosperity or No for economic mayhem.