Moving forward by looking back, 1998

Photo: Wikimedia

In 1998, it looked like Jean Chrétien and his Liberals could remain in power forever. With his response to the near loss of the 1995 referendum, however, Chrétien sowed the seeds of his party's ultimate defeat.

When he was still part of CBC television's This Hour has 22 Minutes crew Rick Mercer would travel regularly to the U.S. to do his talking-to-Americans routine. Once he asked some typical Americans-in-the-street whether they thought Canada should give up its 10-hour day and adopt the U.S.'s 24-hour day. His interlocutors thought it was a grand idea.

It was a joke of course, the main point being that Harvard professors and New York sophisticates might actually believe Canada was on the 10-hour clock. But, in fact, there is a certain arbitrary quality to the way we divide time.

In our previous story, we embraced that arbitrariness. It is the beginning of a New Year and so we decided to look back at previous years that were once new, proceeding by that wholly arbitrary division of time, the decade. Last time we went back one decade to 2008. Today, we go back two decades, to 1998.  

1998

As the year began, Jean Chrétien was in his second term as prime minister. First elected with a healthy majority in 1993, after nearly 10 years of Sturm und Drang under Brian Mulroney's Progressive Conservatives, the veteran Liberal leader only squeaked to a bare majority victory in June of 1997.

Over the previous three-and-a-half years, the Chrétien's government's sole focus had been on cutting the deficit by slashing spending. Finance minister Paul Martin led that charge, with preternatural, almost demonic enthusiasm. He had told a House committee that he would radically reduce the role of government and balance the budget "come hell or high water," and do so without raising a penny in taxes on anyone, not even the wealthiest of the wealthy. He was true to his word.

Martin made deep cuts to foreign aid, to such institutions as the CBC and to the public service. More important, he and Chrétien disengaged the federal government from an active role in building and maintaining Canada's social architecture. Liberal governments had designed that architecture over a period of three decades, going back to the NDP-supported minority Pearson governments of the 1960s. 

Prior to Chrétien and Martin, there were two principal ways by which the federal government partnered with the provinces to advance Canadians' welfare and well-being. There was the Canada Assistance Plan (CAP), under which the feds matched provincial spending on social assistance and social services dollar for dollar. And there were the per capita transfers to the provinces for higher education and health care, the Established Program Funding (EPF) arrangements.

Overnight, Martin and Chrétien tore down that carefully built structure, replacing it with a much-diminished single payment to the provinces, the Canada Social and Health Transfer (CSHT). The words social and health were later reversed and it became the CHST. It was a public relations decision. The Chrétien Liberals had discovered that Canada's more-or-less universally accessible health care system was the program voters cherished the most.

The federal government does not only transfer funds to provinces for social purposes; it delivers its own social programs as well, principally employment insurance and the two pension plans. Martin wanted to cut both, and got his way with employment insurance. But Chrétien held him back on pensions. The wily Liberal leader remembered that his predecessor had paid a big political price for attempting to de-index the basic old age pension, Old Age Security (OAS).   

Chrétien never promised budget cuts and zero deficits

Ottawa insiders still consider Martin and Chrétien to be heroes for having slayed the dreaded deficit and, supposedly, saved Canada from bankruptcy. In hindsight, however, the entire exercise looks like a massive over-reaction. Canada achieved zero deficits in the late 1990s largely through economic growth powered by a boom in the U.S. The Chrétien-Martin cuts caused far more real harm, in the form of weakened health and social services and increases in homelessness and poverty, than good.

The political and mainstream media myth, at the time, was that Chrétien was something of a political genius for having pulled off his austerity plan with minimal resistance. In fact, the precipitous withdrawal from social spending made it difficult for him to defend the federalist position during the near-death 1995 Quebec sovereignty referendum. The "no" side won that one by a mere 50,000 votes, and the separatist Parti Québécois won re-election in 1998.

The Liberals' austerity program also breathed new life into the NDP, which had been reduced to a mere nine seats in the 1993 election. In 1997, the party of the social democratic left won 21 seats and jumped over four per cent in popular vote, the biggest increase of any party. Jean Charest's Progressive Conservatives (PCs) also reasserted themselves, jumping from 2 to 20 seats.

In April of 1998, Charest accepted the pleas of desperate Quebec federalists and took over leadership of the Quebec Liberal party. There was a widespread view that he had been the most effective performer on the "no" side during the 1995 referendum campaign. Former Prime Minister Joe Clark succeeded Charest as PC leader. He did not last long, but that is another story. 

In 1997, a good many voters were disappointed with the Jean Chrétien Liberals. In power, the Liberals had betrayed a number of key 1993 election promises, notably the pledge to abolish the much-reviled goods and services tax. In 1993, Chrétien had campaigned on his highly detailed Red Book electoral program, waving it around at rallies and clutching it for dear life in television commercials. But his program in government was entirely different from his electoral manifesto. The Red Book was all about hope and a positive, active role for government. It made no mention of austerity and achieving zero deficits -- not one word.

Chrétien survived in 1997 only because the opposition was divided four ways. The bulk of his members were from one province, Ontario, 101 out of 155 seats. He lost a number of his MPs in the West, and in Atlantic Canada, where he swept every seat save one in 1993. The only Atlantic Canada holdout back in 1993 was the Moncton seat of anti-bilingualism PCer Elsie Wayne.

Achieving visibility in Quebec

The single province where Chrétien did slightly better in 1997 than 1993 was Quebec, where he won seven more seats and increased his vote share by three per cent.

After the 1995 referendum, Quebec became something of an obsession for the Chrétien Liberals. They did not lay blame for the federalists' poor showing in the vote on Quebec separation on their own excessive austerity policies. Instead, Chrétien and his troops believed the key problem for the federalist side was that the government in Ottawa had become nearly invisible in Quebec.

After 1995, Liberals and senior federal officials took to complaining that in an effort to appease his Quebec nationalist allies Mulroney had taken the Canada flag away from post offices in his home province, and, in general, downplayed the federal role in Quebeckers' lives.  Chrétien wanted the federal government to, as he put it, péter les bretelles -- snap its suspenders with pride. In service of that goal, the Liberal prime minister set up the Canadian Millennium Scholarship Foundation and the Canada Research Chairs, both of which sought to visibly insert the Canada brand into a provincial domain, higher education. Federal departments also took to insisting that organizations receiving even modest Government of Canada funding should publicly, yea enthusiastically, acknowledge their gratitude.

Those were benign measures.

More problematic was the sponsorship program. Its aim was to find opportunities for the federal government to subsidize local festivals and similar events in Quebec. The point was to get the Canadian red maple leaf prominently displayed.

Chrétien put a career civil servant, one Chuck Guité, in charge of the program. As Guité later put it, he behaved as though he was at war with the dreaded separatists and thus the usual rules of good governance did not apply.

The sponsorship program became a cesspool of greed and corruption, an opportunity to feather the nests of Liberal connected companies in Quebec, and divert public money to the party itself. But all of that remained under the radar for years. It was not until Chrétien had won another majority, in 2000, and then yielded to an impatient Paul Martin, who had been chomping at the bit for quite some time, that the scandal blew up in public. The corruption engendered by the sponsorship program resulted in a number of criminal convictions. More important, it seriously eroded public trust in the Liberals.

Martin managed one minority victory in 2004. But the sponsorship scandal deepened, fed by the Commission Martin had named, headed by straight-talking Quebec judge John Gomery. The eventual result was that Canadians reluctantly turned to Stephen Harper and his newly merged party of the right.  It was, however, Chrétien not Martin who planted the seeds of his party's defeat.

Indifference to Indigenous people and the Asian crisis

There was, of course, a lot more happening than Quebec associated scandals 20 years ago.

For instance, Indigenous Canadians should have been high on the national agenda. The Royal Commission on Aboriginal Peoples (RCAP), which Brian Mulroney set up in 1991, had issued its far-reaching and creative set of detailed recommendations in 1996. But the Chrétien government utterly ignored every single one of them. The media barely took notice of RCAP, and the report quickly disappeared to the government's dusty back shelves. Indigenous people were not the political flavour of the month 20 years ago.

Beyond Canada's borders, U.S. president Bill Clinton was coping with his own scandal, a matter many dismissed, at the time, as a harmless dalliance. The view of the U.S. president's sexual relationship with a young intern has changed considerably in the intervening years.

One of the biggest scandals of the time was happening far away from these shores and was little noticed in Canada or in the West in general.

A number of Southeast Asian countries, including Thailand and Indonesia, were enduring what was dubbed the Asian financial crisis. Speculators had beggared a number of Asian currencies, notably that of Thailand, causing those currencies to rapidly lose value in world markets. Asian countries' stock markets and other asset prices dropped deeply, and many of those countries faced huge challenges in paying their internationally held debts.

The U.S. dominated International Monetary Fund (IMF) stepped in with draconian solutions, mostly designed to protect Western financiers, not the people in Asia most affected by the crisis.

The IMF's solutions resembled those which Republican president Herbert Hoover prescribed for the Great Depression of the1930s. Hoover believed in belt-tightening and avoiding debt, the opposite of what the crisis demanded. The IMF's structural adjustment packages required countries such as Indonesia to reduce public spending, raise interest rates, eliminate barriers to capital flows, and curtail most measures that favoured locally owned businesses over foreign investors.

Malaysia resisted the IMF and came out stronger and more autonomous in the end. Elsewhere, the crisis and the IMF's intervention resulted in decreased economic independence and increased poverty and unemployment.

But the world financial system was, as it were, saved. The IMF succeeded in stopping the Asian contagion from spreading. To the average Canadian, it was all far away and hardly seemed to have happened. 

Next time, we go back 30 years to 1988, the year of the so-called Free Trade election in Canada. It was also the year in which a new political force in Canada, the Reform Party, made its first appearance. 

Photo: Wikimedia

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