Canadian Roulette

Republished on on February 07, 2006

Forbes, Sept 25, 1995


Russian roulette:
Our neighbors to the north play
Canadian Roulette—staking their entire Confederation on
a single election result.

It`s happening again this fall. The
separatist Parti Quebecois government of Quebec,
Canada`s majority-French-speaking province, is recalling
its legislature to initiate a referendum on a move to
independence, probably in late October or mid-November.

Yawn? They lost a

similar referendum in 1980
and opinion polls show
this one losing, too? Don`t be so sure. "The
financial markets just haven`t discounted the
possibility of an upset,"
warns economist Michael A.
Walker, executive director of the Vancouver- based

Fraser Institute
think tank.

Walker still thinks the referendum
is likely to be defeated. But he adds:

"Anything short of clear and utter defeat for separatism
is going to mean a continuation of uncertainty. If the
separatist vote is higher than last time [40%], it`s
going to start to look like an inexorable march to
sovereignty. They can always hold another referendum."

In other words, there is a real
live bullet in that revolver`s whirling magazine. The
hammer could fall on it now. Or later.


Or, in the view of Walker and the
Fraser Institute, Canada`s Confederation may well be
forced to decentralize anyway, regardless of the Quebec
vote. It may be forced by a fiscal smash brought about
by profligate spending and borrowing habits—which,
ironically, date back to the Canadian leader who
engineered Ottawa`s failed strategy of bribing Quebec to
stay in Canada:

Pierre E. Trudeau
(prime minister, most of the time,

Why don`t financial markets
discount Quebec efficiently? Answer: imperfect
information. Look at the different headlines that
Quebec`s Journal de Montreal and Ontario`s
Globe and Mail
put Aug. 25 on their jointly
commissioned poll showing that 49.5% of Quebecers would
probably vote for sovereignty, 50.5% against. Quebecers
were told, "Oui et Non a l`Egalite"—Yes and No
Tied. Ontarians were told, "Sovereignty Drive Seems
to be Stalled."

English-language media coverage
eerily echoes the Canadian federal government`s official
line toward the referendum: Play it down and hope it
goes away. But Ottawa has no choice: Its efforts to find
a constitutional compromise have collapsed. U.S. bond
traders, reading only English (if
), might find themselves cruelly misled.

The Journal de Montreal was
right to imply a potential upset. The poll`s 3% margin
of error means the Yes side might really be ahead.

And there`s this complicating
factor: The fifth of Quebec`s population that is not
French overwhelmingly opposes leaving Canada. Take them
out and a clear majority of the French community
supports the idea. Could Quebec`s French simply override
the wishes of the English minority? It`s happened before
elsewhere. So it`s hardly a stable
situation—particularly because the only party in the
province`s legislature that opposes a Yes vote, the
Quebec Liberal Party, says it is doing so on the
explicit understanding that English Canada will accept
major constitutional reform, giving the province still
more autonomy. No one in an increasingly fed-up English
Canada thinks this is even remotely possible.

U.S. bond traders might also be
misled by a less-than-perfect knowledge of the history
of independence movements. These things are more
frequently engineered by determined activists than by
mass opinion.

Fourth of July
oratory aside, they are rarely
unanimous popular uprisings. In the
Revolutionary War
, only about a third of Americans
are estimated to have supported outright independence.
In India half a century ago, roughly half the population
didn`t even know the British were there, let alone want
them to leave.

In the British General Election of
1918, the radical Sinn Fein party won almost every seat
in what is now the Irish Republic and set up

its own Parliament in Dublin
. Yet a majority of
Irish votes went not to the Sinn Fein, but to parties
espousing some link with the United Kingdom.

Note that what Ireland got after

was still not complete independence but a form
of "sovereignty-association" with Britain—shared
, reciprocal citizenship—remarkably similar
to what the Quebec separatists, mindful of their
cautious countrymen, are derided by Ottawa for saying
they want.

"Our [referendum] question will
be better framed than last time,"
Quebec Deputy
Prime Minister Bernard Landry tells FORBES confidently.
Landry describes the Parti Quebecois view of the future
Quebec/Canada relationship as "a
European Union
approach, not more, not less."

Landry adds that the PQ`s late-August polls show the Yes
vote edging ahead.

The separatists have edged ahead in
another way as well. At the time of the last referendum
in 1980 all Quebec`s seats in the federal House of
Commons in Ottawa were held by federalists. The
separatists had chosen not to run in federal elections.
Subsequently they changed their minds. Now most Quebec
seats are held by the separatist Bloc Quebecois.

Canada`s political parties have
fractured regionally. So even if Quebec`s separatists
lose the referendum, they could eventually hold the
balance of power in Ottawa, perhaps even after the next
federal election, due by 1998. They will then be able to
extort constitutional change anyway.

Economics as well as politics is
pushing Quebec closer to independence. Canada has
managed to combine both government spending levels and
deficits that are significantly higher than those of the
U.S. Consequently, the interest burden on Canada`s
government debt is becoming extraordinary. And there is
no room to increase spending to accommodate it.

In a new book,

Thirty Million Musketeers
Fraser Institute
Senior Fellow Gordon Gibson argues that Ottawa will soon
be forced to cut its cash grants to the provinces and
other expenditures. But these have been key to
establishing its paramountcy. In return it will have to
devolve more power.

Canada, writes Gibson, may start to
look more like

—or like Belgium, which since 1970 has
effectively split into


components without anyone outside really
noticing. Call it independence or call it devolution of
power, the Quebec bullet will be fired eventually.