BUSINESS

Quebeconomics

Before they taste sweet separation, Quebecers have some bitter pills to swallow

DEIRDRE McMURDY November 13 1995
BUSINESS

Quebeconomics

Before they taste sweet separation, Quebecers have some bitter pills to swallow

DEIRDRE McMURDY November 13 1995

Quebeconomics

BUSINESS

Before they taste sweet separation, Quebecers have some bitter pills to swallow

DEIRDRE McMURDY

It is a bit like one of the twisted riddles from the Mad Hatter’s tea party in Alice in Wonderland: when is a federalist victory actually a separatist victory? Unlike the Mad Hatter’s riddles, however, this one has an answer. Despite their official defeat in last week’s referendum, the separatists have actually managed to compound the gnawing uncertainty about Quebec’s next step towards sovereignty. And that’s more than enough to keep international currency markets on edge and to keep the Canadian dollar—and the federal government—hostage to the Yes campaign’s political agenda.

One of the capital market’s core tenets is “when in doubt, get out.” So, as the narrow margin of victory sank in and Premier Jacques Parizeau tendered his resignation, the evil twins—foreign currency traders and international credit raters—began to reconsider their relief.

On cue, the dollar began to slide back from its post-referendum spike of 75.10 cents U.S. Then,

Moody’s Investor Services of New York began to make growling noises about returning the national debt to the top of Ottawa’s list of priorities.

Of course, it is the height of patriot chic to denounce traders, credit raters and their periodic assaults on our dollar and interest rates. But at the risk of sounding tiresome and traitorous, they are actually entitled to such a strident voice in our fiscal affairs. The finance department’s recent chestthumping about meeting its deficitreduction targets notwithstanding, Canada borrows almost $20 billion a year from foreigners.

Given the separatist leader’s skill at manipulating the money market and commandeering control over Canada’s economic prospects, their sloppiness in their own backyard is all the more perplexing. Any group that is genuinely committed to sovereignty must have figured out by now that sturdy economic underpinnings are imperative for political independence—in Quebec or anywhere else in the world.

The problem is that, like all overindulged children, the separatists want to

eat their dessert before they eat their vegetables. Still, if a sovereign Quebec is to survive, let alone thrive, it must have a more balanced diet. The province’s rickety economic legs could never support the sovereigntists’ utopian pledge to build a francophone society, unencumbered by the small-minded social-spending cuts and the petty budgetary constraints that have plagued other governments within Canada.

Let’s get real. Quebec is currently saddled with a provincial debt-to-GDP ratio of 43.2 per cent. That works out to about $10,212 a head, higher than the level in any other province. Quebec has an aboveaverage unemployment rate of 11.3 per cent (much higher by some tallies). Just last week, the Quebec government discovered that it had underestimated its welfare tab for April and July by $322 million. Furthermore, the emergency fund that is supposed to paper over such minor miscalculations doesn’t have the cash to cover the shortfall. Finally, despite all the clatter about Quebec’s export-oriented economy, it still runs a trade deficit of almost $5 billion a year.

If that’s not enough to fret about, the separatists have seriously—and selfdestructively—alienated both employers and investors with their vitriolic attacks against the conspiracies of “big business.” Nevertheless, it’s a bit of a stretch to envision a developed, competitive economy without a concrete foundation of capital and confidence.

That is not to say that there is no legitimate role for passion, vision, rhetoric or emotion in the debate about Quebec’s future. In fact, the emotional component of the separatist pitch could—if the provincial economy were in decent shape—provide the spark to ignite significant growth. But when there is no economic foundation to support the proud words and dramatic gestures, they become merely an exercise in theatrical futility—not a credible push for sovereignty.

Sparing any electorate from firm economic discipline to win political support is always a dangerous game. And it provides tremendous scope for snatching defeat from victory. Just ask Ottawa.