Charles Taylor: Nationalism and independence
From the March-April 1967 edition of CD

The following is a digitized version of an article from Canadian Dimension’s print archive, which is now available for the first time through the University of Manitoba Digital Collections. It originally appeared in the March-April 1967 edition of CD (Volume 4, Number 3). To preserve these articles as they originally appeared, we do not alter, edit or update them.
It is distressing to see how Canada is facing the fateful set of choices which are now opening. It seems almost as though many Canadians are bent on not facing the issues which demand an answer. At a moment when the future basis of the country, perhaps its existence as a country, is in the making or unmaking, a veil of spurious questions hides from view the bare bones of a reality which, one would think, is stark enough.
The confusion is at its thickest when it comes to Canadian nationalism, and particularly nationalism in its relation to economics. In this domain there is a widespread attitude (in English Canada) that nationalism is something wrong, passé and irrational, which Canada must grow out of, and therefore the less said about it the better, and a commonplace idea that, if we do after all want to go in for it in a big way, it will cost us a large part of our present standard of living (the prime minister in a statement last year put this figure at 30 percent).
But this attitude and this idea flourish in the confused blurring of important distinctions between very different things which can go under the name “nationalism.” They involve turning our backs on an imaginary option, one therefore not really open to us, and letting go by default the options that are.
For a start, nationalism can mean the kind of visceral emotion which puts an absolute value on whatever participates in or springs from the nation’s life and makes this the arbiter of right and wrong. Although the modern world is littered with the wreckage caused by this type of nationalism, Canada cannot claim to be free from it, it lies not very far beneath the surface in much of French Canada, and in some of English Canada too. But to imagine that we could ever fall under the spell of a Canadian nationalism of this visceral type is fantastic. We are much too diverse. Only the constituent cultures or “nations” which make up Canada have the cohesion to generate this kind of emotion. If it ever gets hot enough it will break up the country—as it has threatened to do in the past. As a basis for Canada this nationalism is not a live option.
But there is another kind of nationalism (indeed there are dozens of others) which draws not on these emotions, not on the same fears or the anxious but suppressed sense of inferiority which powers visceral nationalism, but rather on a sense of the significance of what a people is doing together, of its collective achievement and its common goals. This form of national sentiment commonly arises, for instance, from a revolution like the American or Russian, and, of course, it can degenerate, as the common values become fetishes, turn into a “way of life” which automatically validates everything which belongs to it and demands an absolute allegiance. But before this happens, if it ever does, this kind of sentiment can be open to universal values in a way that visceral nationalism cannot. For what gives significance in their own eyes to the collective achievement of a people can be, among other things, the universal values which that achievement promotes, whereas in visceral nationalism, by definition, the final criterion of value is belonging to or being part of the national essence or heritage values which are explicitly non-universal. This fact has relevance to the Canadian predicament, as I would like to show.
Now, if it is true that Canada cannot survive a wave of visceral nationalism, it is just as true that the country cannot live without a powerful national sentiment of this second kind. Any modern state, based on mass participation, requires a high degree of public morale, a sense that the community is worth while preserving—in a way that, for instance, the dynastic states of previous centuries did not. But Canada has special problems of its own in this domain. Most comparable countries can found their sense of identity on a common culture, and/or a common history, great events lived through together have helped to weld them as a nation. Canada hasn’t the first, and also largely lacks the second, the great historical moments which usually weld nations together—e.g., wars—have tended more or less deeply to divide us. Even the more “romantic” pages of our common history, such as the Riel Rebellion, are sources of division rather than unity. The economic crisis was a deep, even traumatic, common experience, but it too served if anything to entrench our divisions.
A sense of the significance of our collective existence can therefore only come from the value of our common projects. Canadian nationalism must necessarily be prospective; in this way, we have not advanced a step in the first century of our existence. The 1960s, like the 1860s are a period where we hesitate between launching a common enterprise and breaking apart. In being prospective, the (still largely potential) Canadian nationalism resembles the sentiment which arises from a revolution, even though our country, the confluence of many counter-revolutions, seems the farthest away from any upheaval.
All this is in a sense the flattest truism. And yet Canadians seem to have difficulty in sizing up their situation in its own terms, and therefore seeing the real alternatives, as though part of the sickness of Canadian nationalism were that we are irresistibly drawn to defining ourselves with terms borrowed elsewhere, particularly from the US. It is irrational for Canadians to look with disgust on the strand of great power chauvinism in US policy, on the horrors of European wars, and so on, and to conclude that we should renounce nationalism. That kind of nationalism we could never have anyway. The kind we could have is utterly different and is, indeed, the best antidote to the first kind. True, Canadians have their work cut out fighting chauvinism within our constituent groups, but surely the best way to fight these narrower obsessions is by proposing something bigger.
But all this might be thought to beg the crucial question: are there common purposes, big and prepossessing enough to justify our common existence, or should we face the fact that Canada is not worth it, and wind it up (meaning, I guess, break up into constituent parts, some of which join the US)? Both alternatives need much more serious examination than they have received.
As far as the first is concerned, I believe that there are such common purposes, and without claiming to express them definitively, I think they can be described in three main categories. First, Canada’s vocation is to develop the five great regions as full-scale societies. Without government action, many parts of Canada could achieve a decent standard of living only by a large scale exodus of population, leaving behind only the number of people required to service a resource base for foreign (mostly American) industry. And again, without large-scale government action to assist the exodus; it would not even take place, so that big regions of Canada would remain pockets of growing relative poverty. Moreover, should the exodus be encouraged, it would have to be largely directed south of the border, and this would have a depressive effect on the quality of life even in those centres where a more diversified economy might be viable. Montréal, Toronto, Vancouver, shorn of their hinterlands, would be in piteous plight. The point of having Canada is to avoid this potential (and partly actual) outcome, to develop all regions of Canada fully and to develop them with some measure of equality.
This need not mean flying in the face of objective economic cost factors in order to pay for a country. The way an economy would develop without government intervention is not necessarily any more “natural” or “economic” than the way it develops if planned. Planned development can turn the tide in an underdeveloped region without increasing, often decreasing, the cost to the nation as a whole. Indeed the principal aim of uniting these diverse regions into one body politic can only be their combined development, if we let this drop, or pursue it half-heartedly, as has been the case for the last century, then there is good reason to ask why Canada should exist. But combined development does constitute a goal which would mean a fuller and more prosperous life for the vast majority of Canadians.
This is perhaps not a value of universal significance, although it is the fundamental purpose, but Canada also has thrust upon it another vocation which is of value to the world. We have somehow to develop a mode of existence where different cultures can grow and be fully themselves without paying the price of isolation, while helping, that is, to enrich each other. We have to develop a society in which diversity is welcomed as richness and not feared as the prelude to division. A rapid look around the world will convince us that such a society, apart from being enriching to its members, would be a service to the human race.
Thirdly, once we exist as a country, we cannot avoid our obligation to play a role on the international scene. Without launching into illusions of grandeur bred by our exceptional position immediately after the last war, we can nevertheless see a certain strategic role in the attempt to preserve peace for a middle power, rich, relatively trusted in all parts of the world, although white, and relatively free from deep involvement in the multiple mutual hatreds which crisscross the globe.
This statement of aims is very summary and imperfect. But any discussion of Canadian nationalism cannot be carried on properly unless these, or similar cards are laid on the table. Since Canadian nationalism can only be prospective, we have to be able to express, even somewhat inarticulately, what our purposes are. But for those who are unconvinced by this three-fold purpose, or who are unmoved by it, let us examine the alternative.
Sometimes people speak of “joining the US,” as though this was a real option for Canada. But it could never be the object of a common decision by Canadians, as, for instance, we could decide one day to amend the constitution. Parts of what is now Canada could join the US only if the country broke up, perhaps partly in disagreement over this. It is hardly likely that nationalism, for instance, in French Canada could ever be overcome to the point where Québéc would consent to be part of a fifty-first state, thus brusquely drawing a line under 350 years’ history.
Secondly, it is not all that likely that the Americans would be eager to have us. The days of manifest destiny are past, or perhaps this policy has taken more subtle forms. It can, of course, be interesting to the US to control Canadian policy more closely; but is it not much more valuable to them to have as a neighbour a middle power, with all the trappings of independence, which keeps its own intractable internal problems to itself and nevertheless does what it is told?
We should not assume that a viable alternative to refloating Canada is annexation. It may just be break up, or short of this, a kind of twilight zone of fictitious independence, more and more under remote control from Washington. Indeed, we are already entering a twilight zone of this kind.
When seen in this light, the alternative to a viable Canadian nationalism can hardly be called attractive. Canadians would be reduced to the status of very second class citizens. We would have to follow policies made in Washington without even the opportunity which anyone has living south of the border to influence these policies by our votes. We face the prospect of toeing the line more and more closely in future Viet Nams, without even a Robert Kennedy or a Fulbright to speak for us. Outright annexation would be preferable to this. In such a Canada, the present state of doubt and uncertainty would increase, a sense of futility would grow which would make it next to impossible to keep our most energetic and talented people; our principle function would be to subsidize the US economy by sending trained personnel across the border without charge.
Lest this seem all too apocalyptic a prospect, let us look at developments today. Not only is Canada hemmed in in foreign policy—we cannot recognize China, nor have our own policy in Viet Nam, nor refuse nuclear weapons, all because against our better judgment we bow to US pressure. Our hands are also becoming more tied in domestic policy as well. Four years ago we pegged the Canadian dollar at 92.5 cents US. Three years ago we agreed to maintain our exchange reserves at a given level as the price of our partial exemption from the American Interest Equalization Tax. These two moves together reduce our freedom in the domain of monetary policy to very narrow limits. Again, the recent guideline issued by the American government to companies with subsidiaries abroad show the vulnerability of the Canadian economy to indirect American control of a political kind. With the growing rate of American ownership in Canada, can anyone doubt that this kind of slow “satellitization” is on the increase?
Unless, that is, something is done about it. And here we can see the full measure of potential disaster implicit in our current confusions. The alternative to Canadian nationalism is not a far-seeing policy of rational welfare on an international basis, but instead a gradual slide into satellite status, which will make it more and more difficult to solve even our problems of economic development with the full measure of freedom we require. The alternative is a policy of paralytic continentalism. And the tragedy is that that policy is being followed today, unavowedly, by the Liberal government.
Only the indescribable mixture of confusion and hypocrisy which is so characteristic of Canadian politics at the federal level can hide this fact from the general view. Beating back the vain attempt of Walter Gordon to give its policy a nationalist direction, the federal Liberal Party has consistently slid down the path of piecemeal, muddled integration. It has tied our hands in monetary policy, watched a potentially enormous loss of sovereignty in trade policy (represented by the guidelines) with complete equanimity, until stung into some semblance of action by the philippics of a provincial minister, has presided in the past, and continues to preside, unruffled, over a Canadian economy increasingly modelled after the image of the branch plant, as they exempted from legislation protecting Canadian magazines the two American periodicals whose existence justified the legislation in the first place, changed policy overnight on nuclear arms, etc., etc.
Whether consciously or not, this party is plainly oriented toward a continentalism of an increasingly paralytic kind. Since there are signs that this policy is approved of by the overwhelming majority of Canada’s business elite, it is not surprising that it should be the policy of their major political instrument. But what is surprising, and symptomatic of Canada’s sorry plight, is that all this should happen in a half-light of semi-consciousness, that the Liberal Party can still pose as a party seriously interested in remaking Canada as an independent power, that all these measures are adopted under absurdly euphemistic titles, which hide their real import (thus the 1963 election which decided whether we should cave in to American pressure on nuclear arms was fought by the Liberals on the question whether we “should keep our promises”).
It would be simplistic to attribute this to a conspiratorial policy on the part of the Liberal Party. Hypocrisy of this kind is part of the stock-in-trade of the kind of politics it is accustomed to practice. But all this wouldn’t work if there weren’t a half-conscious connivance on the part of important sections of the electorate. Obviously, many Canadian electors do not want to face the choices. They prefer the hypocritical phraseology, because it hides the stark choice, whose implications are somewhat frightening. There is clearly in Canada a widespread lack of confidence, a sense of inferiority vis-à-vis the US, a failure of nerve. Again and again, in the course of a political campaign, one finds electors who say: that would be wonderful, but would the Americans let us do it? For these people and many others, the limits of possibility are drawn much more narrowly than they are in fact. They feel beaten in advance. The political activity of the Liberal Party both feeds this mood and profits from it. When the prime minister poses the economic choice before Canadians in the terms mentioned above, either foreign take-over or a cut of 30 percent in the standard of living, the effect can only be to increase the sense of inevitable defeat. And in turn, the sense of inevitable defeat can only profit the party of painless accommodation to the unmentionable, viz., the Liberal Party.
II.
The nub of the question is in the end economic. One of the underpinnings of paralytic continentalism is the commonplace idea mentioned at the beginning of this paper, that our choice lies between economic nationalism and a high standard of living. Once again, as in the attitude toward nationalism in general, the possibilities open to us are arbitrarily reduced to two, of which one is so plainly unacceptable that it forces us to the other. But the question is not a simple “freedom, minus 30 percent.” Very often the question is posed in terms of the inflow of foreign capital, the lever by which the foreign take-over of the Canadian economy has occurred. The choice then seems to be: either we own our own economy but do without foreign capital, or we grow rich faster at the expense of foreign take-over. But this stark alternative ignores many crucial questions; for instance, what form does the capital inflow take, loan capital, or direct investment? The difference is important for future control; what kind of economy is being built by this inflow? This is perhaps the most crucial question of all.
Or else nationalism is seen in traditional terms, as the erection of higher tariff barriers, as a kind of super “National Policy.” It is not hard to show the ill-effects of a policy of this kind. Indeed, the “satellitization” we now suffer is in part conditioned by the National Policy. But to pretend that the only alternative to paralytic continentalism is a desperate grab at autarchy is absurd.
The real choice lies elsewhere. The political economy of independence concerns principally a nation’s foreign trade position, in this day and age at least. This is more important than who owns its industry, although it is evident that this latter factor can itself affect the foreign trade position (and in all likelihood does in our case, to a significant extent). The UK is economically independent, in the sense that the greater part of its economy is owned by Britons, and yet its independence is compromised, not only vis-à-vis the US, but also the countries of the Common Market, because of the chronic sickness of the pound. Similarly, Canada’s lack of independence from the US springs in large part from the fact that most of our trade is with our neighhours to the South and that we are in deep and chronic deficit with them. This means that the extent to which they can hurt us, while hurting themselves relatively little, is at a maximum. Fortunately, a reduction in their Canadian trade, although far from disastrous for the US as a whole, would hurt certain sectional interests who therefore constitute a standing lobby in Washington against such measures. Canada is very fortunate that the US is not a monolithic society and that the vast engine of government can still be immobilized by lobbies. Otherwise, we would have suffered a grisly fate long ago.
The major problem of Canadian independence is therefore the problem of developing a more favourable balance of trade, which in turn is the problem of developing a more competitive economy. How does this dovetail with our other, domestic economic objectives? One of our most pressing problems, as revealed by the reports of the Economic Council of Canada, is the development of our economy to give jobs to our rapidly growing labour force. In the opinion of the Economic Council this will require greater diversification into secondary industry. If we want to pursue the objective of combined development of the different regions of Canada—and it will become more and more difficult to justify the country’s existence if we don’t—we must also try to bring about a wider geographical spread of this new secondary industry. But this industry has to be competitive internationally. We cannot increase Canadian employment in secondary industry simply by raising the tariff barrier; or rather we solve the problem in this way only at the cost of a depressed standard of living—if even this solution is possible for a country like Canada in an era of lowering trade barriers.
Illustration by Duncan Macpherson
Thus both the needs of national independence and those of our own basic economic objectives require the development of an economy with a greater component of secondary industry, and which is more competitive internationally—not only vis-à-vis the US, but in the Atlantic and also the world arena. What then is the relation of foreign economic penetration to these objectives?
The relation is basically threefold. First, the growth of foreign, principally US, direct investment in Canada means a high, growing and never ending service of this borrowing in the form of dividends. Of course, Canada has something to show for these payments, namely the plant or whatever built by direct investment. But to build the same plant on loan capital which is paid off over a period of years and then becomes Canadian owned is much less costly in the long run to the balance of payments. Loan capital is therefore preferable to direct investment from the point of view of the above objectives.
Second, foreign direct investment has largely taken a form which has given a certain shape to the Canadian economy. In its secondary sector it is to a significant degree an economy of subsidiaries and branch plants of large international (mostly American) companies. This has two very important effects. First, our economy is very much influenced by the policy of large international companies toward their branch plants, in the fields of exports, research and development, sales and purchases between units of a given international company, and so on. Moreover, certain evidence presented recently by Eric Kierans seems to show that this influence has been very negative in certain aspects and threatens to become more so.
It would appear that for a great many international corporations the role of a foreign subsidiary is principally to increase the market for the parent corporation. The foreign subsidiary therefore plays an important role in buying components from the parent, paying consultant fees, etc., to it, and in so doing, augmenting the profit of the parent company and helping it to amortize its capital. It is not so important that it make profits on its own and remit revenue in the form of dividends. The interest of the subsidiary for the parent is that it allows it to penetrate a foreign market; where the profit is taken, at the level of the subsidiary or at the centre, is secondary; many, perhaps most, corporations prefer to take it at the centre.
It is clear that this practice is bad for the host country. For the policy puts a premium on the subsidiary’s buying from the parent, i.e., on increasing the host country’s imports and thus depressing its balance of trade. Some such factor seems to be operating in the trade between Canada and the US.
Thus in 1968, it is estimated that the balance of trade between Canadian affiliates and their American parents was some $1.063 million in favour of the US (our current account deficit with the US was $1.183 million in that year). In 1966, an educated guess has put it as high as $2 billion. That this pattern arises from a policy of the corporations concerned is indicated by a number of studies of corporations as well as statements by corporate chiefs themselves. In the former category, a study of Business International of 32 overseas affiliates (not necessarily in Canada) belonging to 21 leading US corporations showed that after a total investment of $10.5 million (mostly made during the 1950s), the US corporations realized income from their subsidiaries in the year 1959-60 of the following kind: exports $258 million; royalties and fees $18.7 million; dividends $279 thousands (source: Hearings before the Committee on Ways and Means of the US House of Representatives on the president’s tax recommendations, 1961). It is clear from these figures that the remittance of dividends was of secondary importance. The main interest of the subsidiary for the parent is the increased market it affords.
This is backed up by the statements of many other leading corporations before the House Committee on Ways and Means. The aim of these statements was to show what the corporations had done for the American balance of payments. It is, indeed, impressive; and for a country like Canada, whose economy is made up for such a large part of foreign-owned subsidiaries, very disturbing. Thus the representative of the Joy Manufacturing Company was pleased to report that during the 10-and-a-half years ending May 31, 1961, Joy had exported $98.6 million to and through foreign subsidiaries, had collected $3.8 million for this source, but taken only $1.3 million in remitted dividends. The chairman of Proctor and Gamble claimed that in the last 10 years $47 million had been remitted from subsidiaries in dividends, but $243 million in sales of raw material and equipment. Examples of this type of statement abound. It seems clear that Mr. J.D. Morrow of Joy expressed the policy of many companies besides his own in these words: “The surprising volume of exports to our foreign subsidiaries results first from the sale from parent factories of critical components of machines made abroad, and, second, from Joy International’s constant pressure on each subsidiary to import new joy products brought out by the parent company.”
How much does this adverse balance reflect a natural superiority of the American parent as a supplier? Very little, it would appear, for the policy of buying from the parent is very price-resistant. And one can easily understand why, for a component bought even at a higher price from the parent factory means a greater profit to the corporation as a whole, which profit is taken at the centre, at the expense of the periphery. Thus a study of the National Industrial Conference Board showed that Canadian industry had much higher material costs than US industry. Purchased components represent 35 percent of material costs in Canada against only 23 percent in the US. The principal reason for this disparity lies in the policy of parent companies. A measure of how price-resistant this relationship is is the effect of the 1962 devaluation. This increased import costs relative to Canadian manufactured components but this seemed to have made no difference at all to the import of components by subsidiaries which rose 17 percent in that year, which rise was the major factor in the six percent overall rise in Canadian imports.
The branch plant economy
This aspect of the parent-subsidiary relationship is bad economically for Canada; it severely depresses our balance of trade without valid economic reason. At no greater, and frequently at less cost, subsidiaries could buy a great deal more in Canada. That they do not is expressive of the fact that the corporate private interest and the Canadian public interest clash at this crucial point. Up to now it is the former which has prevailed. In addition, this practice could be even more marked in the future because of pressure on behalf of the American public interest in the form of the guidelines laid down by the Department of Commerce.
This is one way, then, in which the “branch plant economy” does not serve the objectives outlined above. But in another, perhaps more serious way, it leads to a structure of the Canadian economy which is in the long run not going to be internationally competitive. It is not just that units of production which are tied to the purchase of high cost components from parent companies are not likely to be very export competitive. What is at stake is the shape of our economy.
The joint result of our tariff policy and foreign investment has been the placing in Canada of a large number of relatively small scale units of production, as each major company tries to secure its share of the market. This result, of course, sins against the principle of achieving economies by large-scale operations; but this does not deter the large corporation for whom the marginal investment pays off in market penetration. The global result, however, is that Canada has an economy which in some sectors is made up of a large number of small productive units, more than a country of our size would warrant. What other comparable country has as many automobile-producing units, or companies producing refrigerators and other appliances?
In a sense, the Canadian economy must be unique in the world, for it is to some extent a miniature of the American economy. Now the Americans can afford to enter every field of economic endeavour and set up three or more corporations in oligopolistic competition. But this is an absurdity for a country the size of Canada. The only way that a country our size can survive economically is to specialize and achieve pre-eminence in a limited series of lines, as successful small European countries have done. We have only managed to set up this crazy patchwork quilt because of the economics of the international corporation which makes a high-cost additional outlet an interesting proposition.
Many Canadians are satisfied that the accident of geographic location and the tariff has induced American industry to set up this patchwork quilt which we could never have afforded on our own. But this is a very short-sighted attitude. For apart from the disadvantages to our balance of payments resulting from the policy of these corporations, this type of economy does not provide us with the basis for the rapid development toward competitiveness which we are going to need. Branch plant industry tends to be high cost; more, by its marginal nature it tends to be less resistant to the pressures of economic recession. After the boom of the early 1950s, Canada suffered a more severe recession than the US, partly because the chaotic investment in a number of branch plants led to a large amount of excess capacity.
But the most serious drawback is that there is no basis for dynamism. The new developments of research, the initiative which profits by them, the ability to re-adapt and break out in new fields, very little of that is resident in the branch plant economy; it belongs to the centre. The Canadian patchwork quilt, the miniature of the American economy is an expensive present; it deprives us of the basis of autonomous re-adaptation toward greater competitiveness. It is a mechanism whereby the capital accumulated through sales in Canada and all the leverage that that implies for research and innovation goes to centres of decision outside the country, for whom our problems and objectives must be of very secondary concern. It is also a mechanism whereby those Canadians who can make a contribution in research and innovation are attracted irresistibly in large numbers south of the border. Whereas what Canada needs is to achieve greater competitiveness by concentrated efforts in research and development which will give us pre-eminence in a limited number of fields, the branch plant economy offers us the uncertain status of marginal off-shoots of a larger economy whose major levers of adaptation lie forever beyond our reach. It does not seem the part of wisdom to entrust our entire future to a structure of this kind.
If we want to achieve our objectives of combined development toward a more diversified and competitive economy, and thus ensure Canadians a rising standard of living and maintain our independence, we have to take action in the three domains outlined above in which the growth of foreign ownership and the branch plant economy represents a danger to us.
1. We have to try to reduce the proportion of direct equity investment in Canada’s borrowing abroad. This will mean, of course, less investment made by foreign enterprise, and more initiative from inside Canada which, however, will make appeal to outside loan capital, or perhaps even enter into partnership with outside investors. The consequent reduction in the proportion of new investment accounted for by direct foreign investment, mostly of large international companies, will not be a bad thing in itself, as will be seen below, as well as improving the future pattern of our foreign indebtedness.
2. We need a brace of measures to ensure that the affiliates of international corporations which are and remain here behave in a way more consonant with Canadian interests. That these companies are capable of adapting their policies in a significant way if they feel the political pressure to do so is shown by their recent behaviour in a number of fields. The inaction of past Canadian governments perhaps goes some way toward explaining the fact (noted in a study published in Survey of Current Business, US Department of Commerce, December 1964) that while Canadian affiliates of US corporations used about 15.5 percent US imports in their production, their European affiliates used less than five percent.
The measures will have to include the proposal put forward by Eric Kierans, and recently echoed by Walter Gordon (A Choice for Canada, p. 110), to amend the Companies Act so as to force disclosure of the dealings between affiliates and their foreign parents. When we reflect that an essential element of the pressure that the US government exerts on its international corporations to obey its guidelines is the requirement that they make regular reports on their foreign payments transactions, we can see how totally defenceless we have left ourselves in the past. If public disclosure and censure is not enough, tougher measures will have to be taken. But we must ensure that foreign subsidiaries do their part to maintain our balance of payments, and above all that they supply themselves in Canada when cost is no greater.
3. But these measures will be far from sufficient if the pattern of our economy itself as it develops under the impetus of branch plant investment remains the same. Here we have to supply a missing factor. Our historical situation made it inevitable that we have recourse for our development to foreign capital. But the shape that this foreign investment has taken was determined in part by ourselves: first, by our tariff policy, which made it an interesting proposition to set up a branch plant here, but second by a lack of indigenous entrepreneurship. The Canadian economy is increasingly being designed by outsiders because it is not being designed by Canadians. If we are going to alter the pattern of our economy toward a more competitive diversified economy, we have to supply that entrepreneurial element. This is also an essential part of the goal described above: if we are to rely more on loan capital, there has to be the Canadian initiative in making the investment for which the foreign loan is required, instead of leaving both initiative and financing to outsiders.
But both because of the inadequacy of Canadian private entrepreneurship and because of social objectives that our development must meet (particularly that of combined regional development), it is clear that this entrepreneurial element will have to be public; it will have to be supplied by government planning. This means something much more ambitious than a Canadian Development Corporation, genre Walter Gordon. This latter proposal would simply allow Canadian private capital to do on a slightly larger scale what they are already doing. What we need on the other hand is the kind of planning which will invest heavily in research and feasibility studies, which will be able to devise new favourable fields of investment for Canada and determine what is required to maintain our competitive advantage, and then will go out and find the investment funds required. A Canada Development Corporation under public control, as a lever in the hands of a planning authority, would play a valuable—indeed indispensable—role in this. But this is a far cry from the Gordon proposal. What we need in short is to design our own economy; and we can only do this through our governments (the provinces must also do their part). This is the crucial measure.
What then of the pre-occupation with foreign ownership per se? This is in my opinion not a major problem. Its effects, as we have seen, are partially bad, but the way to tackle the problem is along the line of these ill effects. That the above policies would result in a reduction in the proportion of the Canadian economy owned by foreigners is, however, clear. The attempt to reduce foreign direct investment would, if successful, slow down the growth of foreign ownership; the new rules governing the behaviour of foreign subsidiaries might discourage some further investment in this field. And if planned development took place in the context of a phased multilateral reduction of tariff barriers—which should be one of the prime aims of our policy—the interest in branch plant investment would be further reduced. But the major factor tending to reverse the trend towards greater foreign ownership would be a growing element of Canadian entrepreneurship which would flow from government planning. Foreign ownership grows because investment opportunities are met by foreign entrepreneurs, and because many Canadian firms are themselves integrated into foreign units by take-over. The only way to reverse this trend effectively is to increase the component of Canadian entrepreneurship in the economy.
The decisive objection, however, against the policy of buying minority holdings in foreign corporations is that it would mean immobilizing scarce investment resources in the present inadequate structure of the economy. It would mean investing in the branch plant economy, when what we need is to get away from it. Gordon’s answer to this is that there is a need, given the present financial set-up, for investment opportunities of this kind. But that means simply that, assuming the continued lack of Canadian entrepreneurship (i.e., planning), the best investment opportunities in Canada are foreign-held corporations. Insurance companies and other like institutions would therefore like in. But the aim of our policy is not to make things easier for the Canadian investor, but to change the pattern of the Canadian economy. A substantial proportion of those funds which insurance companies now invest should be mobilized in a Canada Development Corporation of the kind described above.
Similarly, the policy represented by the recent auto deal needs to be looked at with a cold eye. Accepting the fact of the branch plant economy, the next best things we may do is to negotiate with each of the oligopolistic groups in turn to see if they can do a bit better by us. But the question is whether we should accept the branch plant pattern as given for all time. The auto deal, involving as it did no progress toward freer trade, meant in effect a subsidy to the auto companies in the form of reduced customs payments to produce more in Canada. One or two deals of this kind may not be bad, but as a practice, this would plainly be an alternative to the policy of investing in a new pattern of Canadian industry, competitive internationally and backed by a strong drive toward the lowering of tariff barriers. In the end we have to decide whether we are going to use our resources to this end, or whether we are going to use them to pry a bit more leverage from the branch plant system. We cannot pretend that the second policy has anything in common with the first.
The alternative: Public entrepreneurship
It should be clear that the alternative to paralytic continentalism is not some irrational grasping at autarchy in the form of higher tariff barrier or an expulsion of foreign capital. The nub of the alternative is a policy of public Canadian entrepreneurship, and the policy would involve a drive to lower tariff barriers. The aim would be to escape the exceptional and abnormal reliance of our economy on the branch plant. What then sows confusion about this alternative, and what makes it possible for Liberal politicians to drag across the stage the ghouls and hobgoblins of autarchic stagnation? What, in short, lies behind the failure of nerve so characteristic of large sections of the electorate today?
The problem is political. For the alternative I have been trying to outline to be a reality and a source of hope for large numbers of Canadians, it would have to appear as a live political option. But for this, in turn, this policy must find a constituency within the Canadian electorate which can be organized around it. And this is the source of the trouble. The normal constituency for this alternative has not yet crystallized; indeed, it has been a largely passive component of the Canadian political scene in the past.
Canada, to a greater extent than other comparable countries, has been under political leadership close to the financial and business elite. This group has had a decisive voice in both the traditional parties which have succeeded each other in office. Canada has not seen, as has been the case in many European countries and even to some extent in the US, a rival coalition of other groups successfully challenge the leadership position of the business elite.
Now this elite presided in a sense at the birth of the country. It was largely their ambition toward cross-continent development in rivalry to the US which powered Confederation and helped shape the economic development of the new state. The crucial political fact underlying the present dominance of paralytic continentalism is that this same social group has over the decades come to accommodate itself to continental integration. The successors to the entrepreneurs of British North America, the builders of trans-continental railroads, are the managers of branch plants and those who service them in one way or another. This drift toward integration lies behind the slowly growing hegemony of continentalism in the old political parties; this hegemony is virtually complete with the Liberals—apart from a voice of two crying in the wilderness, like Walter Gordon—and is more and more dominant among the Tory element of the Conservative party, so much so that this element bolted the party under Diefenbaker, and was induced to do so principally by his defiance of the US.
Even if the business elite were not already wedded to continentalism, it would have reason to embrace it in that the alternative—public entrepreneurship and planning—is distasteful to it. Canada is thus in the unenviable political pass that the group which led it to nationhood is now quietly guiding the country into the twilight zone of satellite status, and moreover stands ready to combat on social grounds the only viable alternative policy. The grip of paralytic continentalism and the resigned fatalism with which it is met by so many Canadians is a measure of the continued hegemony of this group.
The alternative policy is only possible if a new political alliance can be formed to take power at the federal level for the first time without the business elite as its vital centre. Because of the nature of the objectives which are the basis of the alternative—planned development of all regions—this alliance could only be founded on the natural political constituency of reform. In any country this includes middle and lower income groups, but in Canada reform as shown a potentially wide appeal among the people of less advantaged regions and among those who do not belong to the ethnic and confessional group which has virtually monopolized the key posts in the economy and to a significant degree in government as well.
The new political alliance
In other words, there is in Canada a very large constituency potentially winnable for reform among all those economic classes, geographic regions and cultural groups which have not been given their full part in our elite-run society. This is the potential political base for the policy of planned development which is the alternative to the semiconscious decline to satellite status.
But if this policy is to be put into effect, this potential constituency must become an operating political force in all the regions of Canada. And here we come to the principal stumbling block which has doomed such an alliance in the past: the natural constituency of the left suffers from deep regional divisions which the constituency of the right has usually been able to overcome. This is, of course, the reason why national governing parties in Canada have always been controlled by the right. Those elements of the constituency of reform which voted for these parties were in a client-patron relation to them and ended up getting very little for their devoted service. From time to time the exasperated voters of one region or another, Winnipeg workers, Western farmers, rural Québécers, have staged a revolt in the form of a third party intervention. But the revolt has always been isolated, contained, and then often quietly absorbed as the voters in discouragement return to the client relationship with the powers that be.
The potential of the left has been divided in Canada as the right has not been, divided along the big fault lines of rural-urban, and French-English, but also divided between regions and ethnic groups. The right has been able to at least paper over these differences by the formula of the big brokerage party in which everyone is given at least the illusion of participating. Thus generations of notables in French Canada agreed to serve in subaltern or largely honorific posts in the old political parties, and thus shepherded their compatriots into the political base of the English establishment. By this the appearances of “national” leadership and “national unity” were saved. Movements of the left never achieved such unity. And the very operation of the large brokerage parties, with its basic premise that Canadians could only be united by putting themselves in the hands of narrow elites, probably served to deepen the distrust at the base.
The condition of a real alternative to continentalism is that these age-old barriers be overcome. And in this way the problem of Canadian nationalism is inextricably linked to that of Canadian unity. It is not that Canada cannot find unity except prospectively, in a common purpose, for the reasons mentioned above. This fact is important enough, and one wonders how long the already shaky association of French with English Canada can survive the continued integration of the latter in the US orbit. But it is also true that the conditions of both, Canadian unity and Canadian nationalism, largely overlap.
For the old brokerage techniques for producing unity are wearing thin. There is no party in Canada today which can claim to be solidly implanted in all regions. And this development should not be surprising. The system of unity through elite brokerage belongs to an age in which the politics of elitism and deference were much more widely accepted than they are today. The spread of democratically structured organizations among the Canadian people at large—trade unions, co-operatives, credit unions, and so on—the spread of education, the “revolution of rising expectations” which makes people less tolerant of their leaders’ excuses for inactivity, all this has made for an electorate which is more self-confident, less inclined to trust blindly in leaders, and more severely critical of them. There is a growing crisis in Canada as the mood and values of the electorate become progressively out of phase with the old style political mechanisms. Some of the traditional forms of political debate and party struggle are beginning to appear ludicrous and childish to an electorate that formerly felt more awe and respect for the process of politics.
This has a direct repercussion on Canadian unity. To achieve this by elite brokerage is no longer enough; it has to become real at the base of the political society as well. Unless the association with English Canada comes to have more significance—and value—for the average Québécer than it has today, the future of Canada is bleak indeed. And the same could undoubtedly be said for the average English- Canadian in relation to French Canada. In the good old days of follow-the-leader, this hiatus could be ignored, but now the widespread sense of the irrelevance of Ottawa among Québécers is a real and pressing danger to Confederation.
This is also the significance of the coming struggle for biculturalism. At last, millions of English Canadians are being let in on the secret that Canada is not a unicultural country with a few folkloric appendages. And there is no alternative to this in an age where people have learnt to refuse second-class citizenship. What was formerly a matter for small groups of elites bargaining on Parliament Hill must now be accepted by everyone if the country is to go on.
Biculturalism and hence the Canadian future require a widespread sense of the value of the Canadian union among non-elites. It requires, therefore, in the same way as a viable Canadian nationalism, a break with elite politics and the creation of an alliance across the regions of the groups which have been kept under greater or lesser degrees of political tutelage in the past. The problems of unity and nationalism are therefore inextricably intertwined, and both are linked to a polarization of Canadian politics along socioeconomic lines.
The alternatives before Canada: nationalism or continentalism, are therefore far from being as simple as they may first appear. Nor does this question constitute an isolated one. It enters into the heart of our political life as a nation and touches on a set of choices which may set the mould of our politics for generations. In a short space of time we must choose between the continental drift of the elites, and the building of a new political alliance. This implies obviously, too, a political choice in the direct partisan sense. For the building of this alliance is already being attempted by the New Democratic Party.
Charles Taylor is an internationally celebrated public philosopher. He frequently contributed to some of the earliest editions of CD.