December 2003: LIberal or Neoliberal?

What can we expect from P.M. Martin? Read his budget speeches
December 1, 2003

Paul Martin began his budget speech on February 27, 1995, with the following words:

“Mr. Speaker, there are times in the progress of a people when fundamental challenges must be faced, fundamental choices made, a new course charted. For Canada, this is one of those times. Our resolve, our values, our very way of life as Canadians are being tested. The choice is clear.

“We can take the path too well-trodden of minimal

change, of least resistance, of leadership lost. Or we can set out on a new road of fundamental reform, of renewal, of hope restored. Today, we have made our choice. Today, we take action.

In reading this moving paragraph out of context, it would be easy to conclude that the minister was launching a bold new nation-building initiative, a leap into a future filled with hope, renewal, and political leadership. Yet Paul Martin was about to reduce Canada’s spending to a level not seen since well before most living Canadians had been born.

But Martin’s reform was not limited to spending cuts; it included a change in the role of government:

“We need to redesign the role of the government in the economy to fit the size of our pocketbook and the priorities of our people. What is that role? It is to provide a framework for the private sector to create jobs through responsible policies on inflation, on taxation, regulation, trade, and the labour market. It is to see an aggressive trade strategy as central to Canada’s industrial strategy. . . It is to do only what government can do best, and leave the rest for those who can do better, whether business, labour, or the voluntary sector.”

It is difficult to imagine a more sweeping statement about abandoning such large portions of the commons. This new role of government was primarily to facilitate business. Martin also highlighted the role of “an aggressive trade strategy,” by which he meant that all previous efforts to develop industry would now be subsumed into a single economic development policy: promoting trade and the free trade agreements that accompany it. Martin was careful to cast these profound changes in terms of the fiscal situation:

“If we are to ensure durable fiscal progress, building towards budget balance, that can only happen if we redesign the very role and structure of government itself. This budget secures that reform irrevocably. Indeed, as far as we are concerned, it is this reform in the structure of government spending in the very redefinition of government itself that is the main achievement of this budget. . . This budget overhauls not only how government works but what government does.

This budget speech was probably as bold a political statement of intent as had ever been made in the House of Commons. Certainly, it was the budget cuts that received the most attention, but Martin was obviously confident enough in public opinion--and in the impact of the deficit hysteria campaign that had assailed Canadians--that he felt no need to downplay what he and his government were actually doing. They were implementing such a radical top-down revolution that even the clinically cool Preston Manning was left grasping for something to say. Indeed, the program described in Martin’s budget speech was the Reform Party’s platform almost to the letter.

Of course, Martin’s basic assumption, that “durable fiscal progress” could only be achieved by a revolutionary and permanent downsizing of government, was not true. In fact, that assumption would be disproved so quickly in the next two years that Martin would scramble to figure out what to do with the huge government surpluses that resulted from a surge of economic growth. Those surpluses started accumulating once the Bank of Canada lowered interest rates (forced to do so to counter the near-recession caused by Martin’s budget cuts) and the de facto growth strategy was put into effect.

While it did not get much press, if any, another part of Martin’s speech virtually institutionalized the new predominance of the Finance Department in government. Other ministries were reduced to an almost vassal-like state, subject entirely to the Finance Minister and his officials:

“Departments will have to prepare business plans for three years forward. Those plans will be subject to Parliamentary, and therefore public, scrutiny. That transparency and that accountability will mark a major departure from the past. . . Individual ministers are being asked to alter their funding approach accordingly. They will be held accountable for their decisions, and those decisions will be reviewed annually.”

While the spin promised that Parliament would scrutinize department spending, the process all the ministers had been put through during the budget’s creation left little doubt as to whom the departments would be accountable. It was almost as if the whole government, except for Finance, was being put under trusteeship. No longer trusted with the taxpayers’ dollars, and no longer able to claim legitimacy in the new fiscally conservative world order, the mainline departments were suddenly subjected to a kind of internal political feudalism under Paul Martin. Ministers responsible for transfers to the provinces, economic development, regional equality, international aid, transportation, natural resources, agriculture, environment and fisheries effectively became supplicants before Finance.

And then came the numbers:

“In short, overall departmental spending will be cut by almost 19% in just three years. And let me emphasize, these are not the phony cuts we saw so often in the past--measures that pretended to define a slower rate of increase in spending as actual cuts. These are real cuts in real dollars.

“Over the next three fiscal years, this budget will deliver cumulative savings of $29 billion, of which $25.3 billion are expenditure cuts. This is by far the largest set of actions in any Canadian budget since demobilization after the Second World War. . . By 1996-97, we will have reduced program spending from $120 billion in 1993-94 to under $108 billion. Relative to the size of our economy, program spending will be lower in 1996–97 than at any time since 1951.”

Nowhere in substance or tone was Martin apologetic; he did not express regret at having to take such measures. Instead, he boasted about them again and again. This was Martin in his best CEO mode: bragging to the shareholders about reduced costs. He seemed so blinded by the beauty of what he had accomplished that it didn’t even occur to him to express regret over what he would later say “he had to do.”

In attacking government, he borrowed an old trick from Preston Manning and others in the right-wing populist camp. He portrayed government almost as an enemy of citizens, one that took their money for itself. Martin characterized the government as being parasitic, an out-of-control entity that had to be disciplined, rather than a democratic body, an expression of Canadian society:

“In the last recession, every household, every business, every volunteer group in the country was forced to face up to hard choices and real change. But the Government of Canada did not. In this budget, we are bringing government’s size and structure into line with what we can afford.”

The budget also contained major commitments to other principles of the neoliberal Washington Consensus model. Hidden within the cuts to many departments was the biggest deregulation at the federal level in 50 years. Dozens of agencies responsible for studying and protecting aspects of Canada’s heritage and regulating the corporate activity related to them simply disappeared; other agencies experienced cutbacks so extreme that they could not possibly do the job assigned to them. Then there was the commitment to privatization and commercialization, well beyond anything Brian Mulroney’s Tories had committed to:

“The government is committed to privatizing and commercializing government operations wherever that is feasible and appropriate. This is a matter of common sense. Our view is straightforward. If government doesn’t need to run something, it shouldn’t. And in the future, it won’t.”

Martin then listed the first items on the chopping block: privatization of CN Rail, the country’s 70% interest in Petro-Canada, and the commercialization of the Air Navigation System across the country. The privatization initiative, which Martin promised was far from over, was never mentioned in the Liberal party’s election Red Book and had nothing to do with the deficit. Martin did not even connect the two in his speech. It was, however, a fundamental principle of the Washington Consensus and a high priority for Bay Street, which stood to make tens of millions of dollars in fees from this sell-off of Canadian assets.

While privatization was to be expected from a federal government run by a major business party, the commitment to “commercialize” government operations was extremely significant. Although Martin did not elaborate on what he meant, it would become clear over the years that government departments would be run on commercial, business principles superimposed on their traditional mandates.

Thus, as Martin promised, the whole purpose of government would be changed. The commercialization imperative would, in effect, mutate the original mandate of the department or agency in question. To take a single example of what the government had in store for Canadians, the Canadian Food Inspection Agency would be given two mandates: 1) the commercial promotion of Canadian food products; and 2) the protection of the health of Canadians from tainted food. Rather than directly weaken or eliminate the agency mandated to protect Canadians, the “redesigned” Canadian government simply made it subservient to corporate, commercial interests. It was as if the budget had changed the very DNA of government. No other government in Canada, not even the right-wing administrations of Ontario and Alberta, managed to devise such an assault on democratic governance.

Writing the New Canada in stone

Paul Martin’s 1995 budget was really three budgets in one, as it set out the cuts to every government department for the period 1995 to 1998. It was a stroke of political and strategic genius against those who might have fought the program: no one could maintain such a fight for three full years. Other budgets introduced by Paul Martin would contain significant features, both in terms of cuts and even some new expenditures, but the ’95 budget was the watershed budget for the continued corporatization of Canada, the balkanizing of the Canadian state, and the radical retrenchment of social programs that the majority of Canadians had come to expect and still supported.

The only other significant budget action was Martin’s record-breaking tax cut program in 2000, designed to permanently lock in his spending revolution by ensuring that there would be inadequate revenue to restore programs in the future.

Paul Martin and the committed free-market advocates in the Liberal cabinet and in the bureaucracy had truly seized the moment. They took brilliant advantage of a major, if temporary, shift in the Canadian political culture, one that relied on an unprecedented ideological assault on Canadian citizens by the corporate sector and its media voices, think-tanks, and right-wing political parties. People really did seem willing to sacrifice for the good of the country, to tighten their belts, and to do the right thing in the face of a crisis.

In doing so, however, they signed a contract whose fine print they did not read. The changes wrought by Paul Martin’s budgets, and the ripple effect they had in virtually every provincial government and municipality across the country, were equal to any so-called left-wing “social engineering” experiments that governments of the 1960s and 1970s were accused of implementing. Though those rich social programs were attacked by the right as efforts by governments to change the social fabric of the country from above, they had real popular support: they never could have happened otherwise. Paul Martin’s social experiment was driven purely by an economic rationalist ideology in the interests of the very wealthiest of Canadians. Its effects on ordinary working and middle-class Canadians would be enormous.


(Murray Dobbin is a CCPA research associate and a member of the CCPA’s board of directors. He is also the author of several best-selling books. This article is an excerpt from his latest book, Paul Martin: CEO for Canada? which is now available at major bookstores.)