Fuzzy left

First, independently from any impact outside Québec, there is the question of the appropriateness of the tax cut itself, especially in the context of an ageing population. For sure some people still believe that more money should be spent on social programs, but the truly relevant debate is between two concepts of sound economic management: either you take potentially productive risks with your money, or you play it safe and pay down debt. Jean Charest and I prefer the first choice, but others prefer the second and they have a right to defend their preference. But this is the key word: preference. High risks (or more fluctuations) for higher gains on average, or less variance and less expected gain. Financial advisers generally recommend to do a bit of each, but how big a bit will still depend on your… preferences. However, there are complex links between preferences and beliefs, including beliefs about how lucky one “can” be, or about how costly the less risky way really is - depending on the real impact of fiscal policy on the demographic flows themselves for example. And these links are quite problematic in Québec’s economic culture. Anybody who’s heard the expression “né pour un petit pain” (literally, “born for a small bread”) knows what I am alluding to. We should probably be interested in not letting this become a self-realizing prediction.

Yet, even if this is objectively the main ingredient of the current debate, perceptions are a lot more important in short-term politics than reality, and a second source of criticism within Québec comes from the idea that such a tax cut discredits beforehand any further demand under the “solving the fiscal imbalance” heading. In a way, this tax cut would be unacceptable by virtue of making Canadians from other provinces rightfully mad at Québec, and we don’t want this to happen because it hurts us politically, whether because they are just being mad or because their anger is justified. Although it is quite arbitrary, an important assumption here is that some relatively simple moral framework exists which could justify at the outset a particular outcome of the process involved. It has been suggested for example, more or less explicitly, that Québec’s case in this area had been stronger as long as it could plead credibly for compensating an undeserved resource constraint, a plea that in fact the recent tax cuts are likely to discredit. But this assumes that it is less defensible to simply argue for some corrective action on the basis of a reasonable expectation of the government of Québec to benefit politically from its own fiscal self-control. This kind of judgements as to either the morally acceptable use of funds at the end of the day, or about the basic legitimacy of different decision levels, or else as to the honesty of the players in the game and so on, all get mingled together and what comes out is not very nice.

At that level of perceptions, there is certainly here in Québec an honest belief that the fiscal imbalance is more than a rhetorical device to grab money that is not ours, yet apparently even what is legitimately ours cannot remain in our own pockets with as much public legitimacy as if it went into roads, schools and hospitals. This is also something that has to do with our particular economic culture, although I’d say we share that part with the rest of our fellow Canadians, believing that is, that individuals’ economic power is more of a menace to social cohesion than it is a way for society to prosper. This sort of collective masochism - this is my own liberal with a small “l” perception, naturally - has deep reasons I’m sure, but conceptual confusions of other kinds are also worth clarifying, if only to see how unreasonable this RoC anger may be. Then, I leave it as an exercise to decide if unjustified anger should be heeded as it is by opposition parties in Québec.

So the third source of criticism is precisely this anger itself, outside Québec. Now this is all politics in my book. For sure some of the economic moralizing that I just described is at work here, as if public spending was intrinsically preferable to private spending. However there is more than that, and this is what I really want to get at. Here, for example, is a very revealing discussion on our colleagues’ blog from Fuddle Duddle, where a fiscal imbalance denier makes his main argument hinge on the arbitrary choice of the reference point by which Antonio justifies remedial action towards the imbalance, i.e. the federal-provincial transfer levels of 1994-1995. Yet, if the assumption is that no objective “balance” standard exists, it certainly doesn’t make other reference points any less arbitrary. Coherence then requires a truly relativist stance, where it is conceded from all sides that one’s fiscal balance is another’s imbalance. In fact, being angry at Québec getting more money than it should is exactly describing a perceived fiscal imbalance, is it not? In other words, if there is no “objective” standard for fiscal balance, it does not mean that there are no standards, but simply that there is no uncontroversial one, period.

Yet the other important aspect of this exchange between Antonio and KC is the level of confusion as to the very concept of fiscal imbalance, a confusion actually fed by political interest on all sides. If you are looking forward to get some money for political gain, you may be less demanding as to where it comes from. And if you are the one who will hand the money out, you’d rather it doesn’t come from your own funds. Seems like an OK explanation to me for how “solving” the fiscal imbalance - so-called “solving” that is, by the conservatives at least - was interpreted in the RoC as an increase in wealth transfers to Québec from other Canadians, in a completely foreign way to what the concept put forward by Québec originally refered to, and which relates first and foremost to federal-provincial sharing of the fiscal space within Québec. I am not saying that there is no reason for other Canadians to question the equalization process, but rather that what makes them mad comes a lot more from the politics of “solving” the imbalance, including confusing it with something else, than from any well-defined solution, this time without the quotation marks.

If instead the confusion between equalization and vertical imbalance was eliminated, the next step would be to further distinguish between the age-old bone of contention in Québec with Ottawa’s spending power in provincial jurisdictions on the one hand, and how sharing the fiscal space may or may not be in line with each level of responsibilities on the other. It could be helpful to understand correctly how political disagreement with respect to the latter is quite sufficient for an imbalance to appear, as both the equalization and the spending power problems do complicate things but are essentially unrelated to the crux of the matter.

It is also hard not to be struck by the fact that Québec plays such an important part in this movie. Some of it is probably explained by the sheer size of the amounts involved, but I suspect most of it derives from the perception that Québec is always asking for stuff while it is crazily rich with assets and resources of all kinds that are assumed to be plain mismanaged. Why should one search any further anyway when this simplistic interpretation of things seems to work so well? It is certainly true that bad choices have been made in Québec City, that more will be made, and that these are rich grounds for fancy discussions. However Québec domestic policy is no more relevant than equalization or Ottawa’s spending power when it comes to understanding the concept of fiscal imbalance. An imbalance simply refers to a deviation from a presumably correct, balanced way of sharing the fiscal space so that both the federal and provincial levels of government have the capacity to do what the citizens expect from each level at some point in time. Yet there is still something that makes Québec a more essential part of this debate than the other provinces. Let’s think this through a bit further.

I suggest a very simple thought experiment. Imagine Canada is a federation of 10 provinces which are all exactly the same - same population size, same labour market conditions, same natural resource base, same everything - with one sole exception: one of the provinces has a french-speaking population. Right here you already have the one crucial ingredient that you need for a fiscal imbalance, and probably constitutional nightmares to boot. I’ll get to why this is the case in a moment. But change the experiment by eliminating that one difference, or by making your 10 provinces “equally” different from each other as some potential critic of my method could ask for, and you just lost that ingredient. And this is certainly also a good part of the reason why this imbalance is so vehemently denied in the RoC and in particular in my own federal political party: accepting it would threaten the wishful idea that Québec is no more different, or, say, differently different, from the other provinces than each of these are from each other. And a threat to such an idea is often confused, unfortunately, with a real threat to national unity, for some intricate reasons that I won’t even try to disentangle here. Funny thing is, I think, that one could easily argue that the fear of politically significant diversity hurts national unity just as badly if not more than separatism itself. Apparently, some people believe you make a better team when you deny differences than when you recognize their relevance and try to work with that.

But let me go back to my thought experiment however, so that we first see the general case of a “different” province, and then I’ll discuss the “different difference” that makes the Québec part in the imbalance movie so prominent. Three things are going on in my model with 10 identical provinces except for one where french is spoken: (1) a significant portion of the french-speaking population values its specificity and is willing to sacrifice other goods for maintaining it; (2) a significant portion as well of the english-speaking majority respects this, but certainly does not see why it should sacrifice as much for it as the francophones themselves; (3) the political optics are such that the francophone province sees its provincial government as the one most likely to respond to its specific aspirations, while the rest of Canadians see the federal level as the one most likely to cater to theirs. This latter point - which I think is the main source of fiscal imbalance and of much of the Québec-Canada dispute anyway - is in part a consequence of the former two points, but it has a specific component that I shall call the “cost of translation” and I’ll come back to it a bit later.

Now the fact that point (3) is a consequence of the other two is best understood I think as what we economists call a “public good problem”. People with similar preferences will agree to collectively fund public goods more easily than people with conflictual preferences. Therefore, the preference of a minority for speaking french, as it requires special kinds of public goods, will result in this minority being relatively less willing to pool as many resources at the federal level compared to members of the majority. This is why the minority will picture the “balanced” way of using resources more favourably towards the provincial rather than federal level, as it will understand that its preference for specificity will be better accounted for at the provincial level. Conversely, the majority will define its own “balance” according to its relative lack of interest in the provincial capacity to reflect diversity. Assuming nonetheless that both groups do value their mutual partnership strongly enough, a political compromise should be reached at one of the intermediate points between preferred “balances”, and this hypothetical “fair deal” is the required standard if one is to discuss a fiscal imbalance in any logically consistent manner.

Two comments must then be made. First, the argument that I am making applies in a more general way than just at the level of fiscal imbalance. Actually, its most immediate application is with respect to the constitutional division of powers itself. But it cuts through the constitutional setting nonetheless, as the latter does not quantify in any way what portion of resources should respectively go to whatever federal and provincial responsibilities have been legally assigned to different bureaucracies. For sure, lower levels of jurisdiction will generally get a wider array of powers and responsibilities as the general preference for maintaining diversity gets higher, but even given a certain division of powers, the varying preferences for chanelling more or less resources to one or another level of government are still liable to foster additional political disagreement.

Second, one could suggest that the required balancing act is simply given by the actual result of day-to-day multilevel political representation process. Majorities and minorities are not monolithic and political power can certainly be exercised at the federal level in ways that may indeed serve the specific interests of the francophone population. Yet the other side of this coin is that the federal-provincial relations, good or bad, will just as legitimately reflect the democratic will of the population. In other words, one cannot simply say that the current sharing of fiscal space is already what it ought to be, just because it is the result of the democratic process. In fact, the democratic process results just as much in an ongoing debate over what this sharing should be, and it would be difficult to sustain without contradiction that Canadians actually want the current state of things to remain while they still debate so ferociously about it. Unless that is, one expects such schizophrenic behaviour as being a part of human nature, a position I am sometimes attracted to, I must admit.

It’s time now to go one step further. Distinct political preferences of the kind I discuss are certainly enough for different norms to emerge in terms of preferred ways of sharing fiscal revenues, among other things, but even if there were no such underlying difference in preferences, that is even if francophones and anglophones had exactly the same preference for maintaining the current state of cultural diversity in my simplified model, still then, what I called earlier the “cost of translation” could create enough of a perception of a difference to yield the same optical phenomenon such that, again, the population of one province would want its provincial legislature to have access to a relatively larger share of fiscal revenues than what would be preferred in all other provinces. In economist lingo, this is the “limited - or imperfect - information” part of the problem. And it is also the main feature of what I called earlier Québec’s “different difference”. This costly translation factor should be easy enough to understand, for example when you think of how annoyed you can get at reading captions in foreign-language movies, or even worse when you have to sit through hours of simultaneous translation. The basic idea here is that language is how people communicate, however different they may be from each other in all sorts of ways, and the more effort they need to invest in communicating, the less likely they will end up knowing about each other and agree on how to deal with their differences. I have not read her book, but I think Chantal Hébert made a related point about how the Bloc Québécois actually helped Canadian unity, in part by bringing up more questions in french in the House of Commons, thus reducing the psychological distance between Quebecers and their federal government.

The starting point here is the simple hypothesis that two objectively identical individuals, apart from the language they speak, would actually not know as much about their similarities as two people in the same relative position, but who did speak the same language. One could hypothesize further that the higher the cost of translation, the deeper the assumption of underlying differences. Given a number of plausible identities, your uncertainty about interpersonal differences would then decrease when translation is easy, and increase when difficult. Assuming the cost of translation is high enough between Canadian francophones and anglophones, all you need to add to this uncertainty about preferences is a plausible level of risk aversion (more economist lingo, but I’m sure the average reader can still get the picture), and you can predict that the francophone minority will chose its provincial legislature as a better guardian of its interest, while the majority prefers investing its resources at the federal level. Yet nowhere here are any other actual difference than language postulated - differences need only be plausible rather than actual. For sure, in real life, there can be a bunch of mitigating circumstances, but everything else being equal, and in the absence of convincing arguments to the contrary, fiscal imbalances are then quite likely to remain a big part of Canadian politics, especially now that constitutional matters appear locked down as they do. I use the plural form for the said imbalance, by the way, at least because of the multiplicity of relative perspectives towards it, but also because there are other conflicts likely to be at work beyond those reflecting linguistic duality.

It this thus at this point of the discussion that I must explain why I suggested earlier on that there would be no fiscal imbalance if there were no language difference, or if language was just one among many other equally relevant differences. My suggestion related to my simple model, mind you, where only language was explicitly considered as such a difference, yet everybody knows that all real-world federations exhibit at least some level of conflict, fiscal or otherwise, whether or not language is an issue, between the regional and central administrations. In fact, you certainly do not need language differences to have preference differences, and the latter only need to be correlated with the territorial base of lower level administrations for such conflicts to emerge. But in the absence of any difference, or in the special case where all differences would somehow cancel out politically, resulting in all relevant jurisdictions being equally interested in the same balance of fiscal capabilities, an imbalance would simply never become an issue.

The more general real-world case though is where multiple differences exist but don’t cancel out. It is safe to assume that this is Canada’s case, which is why Québec has not been the sole province where the concept of a fiscal imbalance has appeared in the public discourse. Perspectives on its preferred political consequences vary across the country, obviously, but there is nothing particularly suprising there. What is somewhat more interesting is that the thesis according to which “the” fiscal imbalance is groundless political rethorics is not so much directed towards any general debate on fiscal federalism as it is specifically attempting to discredit Québec’s particular take on it. Québec is not in fact the main character of this movie only because it is complaining about being misunderstood. It is also because this complaining does disturb other Canadians in a special way, feeding as it is - or is it resulting from - a general fatigue in the rest of Canada with the disproportionate attention that Québec seems to be getting in national politics.

Yet this vicious circle of mistrust and misunderstanding is nothing but a re-description of the same political imbalance that is the source of Québec’s dissatisfaction in the first place, but seen this time from the point of view of other Canadians. In other words, the unrelenting annoyance at Québec is simply the flip side of Québec’s “different difference” not cancelling out with other differences. Assuming that Canadians generally do care for an identity that is also rooted in Québec’s linguistic and historical heritage - and if they don’t I certainly don’t see why they still put up with us - then I can find no other explanation for this obviously sub-optimal situation than high costs of translation. This is, again, the very reason why Québec’s difference is different from other differences, which do not require translation to be mutually understood and accounted for.

Note that what is costly here is probably not so much the access to what is said in the other language, but rather an understanding of it which is consistent with one’s own subjective experience. Proper translation requires more than semantic equivalents of bits and pieces of discourse. It must also make these “speech acts” stick to a narrative that can be shared, a narrative which can only develop if enough signals of mutual concern get across the linguistic divide. History however, recent as well as not so recent, has rather provided many reasons for both sides to believe that the other just don’t give a damn, and it is this accumulation which is now the real cost driver. Who can we trust now, after all that happened in the past, to translate correctly the real preferences of our fellow Canadians in the other official language?

In fact, a bilingual foreigner reading our dailies in both languages would probably realize quickly enough how bizarre it is, to say the least, that the readership of these papers actually share a country, apart from the circumstancial evidence that they all cover political events in Ottawa somewhat more intensely than dailies from the rest of the world. Imagine then how difficult it can be for the individual members of each of these linguistic communities to understand what the hell is going on in the other one. I sure don’t have a clue sometimes. I mean, I like to believe that people are pretty much all the same, but sometimes I think that I chose to believe so just as to make my own life easier. Still doesn’t seem like such a bad idea. Just like Canada I guess - on shaky grounds, surely, but pretty zen after all.