If you want to understand the brouhaha over equalization and the Atlantic Accord, just visit a local supermarket. There you'll find shelves stacked with brightly coloured boxes, bottles and cans trucked all the way from Toronto. Crackers and cheese from Don Mills, pickles and jams from Markham and baby food from North York. Upper Canada, the land of milk and honey, also overfloweth with processed foods. Most of our manufactured goods, such as cars, come from there too, along with services such as wholesaling, banking and insurance. For every dollar we receive in equalization payments from the federal government, we send three back to buy things, mainly from the industrial heartland of central Canada. In 2002 for example, we purchased nearly $4 billion more in goods and services than we sold to other provinces.
Most commentators fail to recognize this two-way money flow. Yes, we receive federal equalization to help us pay for social programs such as health care and education, but central Canada gets our consumer dollars to keep its businesses humming. In spite of considerable evidence to the contrary, Ontario politicians and editorial writers are in the grip of Stephen Harper's illusion that Atlantic Canada suffers from a "culture of defeat" and that we're addicted to the fat handouts they so generously provide. The opposite is true, of course. Just think of the recent closing of the Maple Leaf Foods chicken plant in the Valley. The Toronto-based company says Nova Scotia doesn't produce enough chicken to justify upgrading its plant. So it has shifted its processing to Ontario and now ships chicken back here from there. Yep, we can still buy Maple Leaf chicken, but the 380 jobs that used to go with it are now in Ontario.
Years ago I learned how this system works from Ernie Forbes, a University of New Brunswick history prof who's an expert on Atlantic Canada. He spoke of what he called "the development of a nationally integrated economy of which transfer payments (such as equalization) were an essential part. It wasn't that the Maritimes were receiving handouts," he said, adding that Ontario and Atlantic Canada actually depend on each other. The equalization system was designed to enable poorer provinces to pay for public services that are comparable to those in richer provinces, at comparable levels of taxation. "I wince every time our politicians, supposedly our representatives, say we must become more self-reliant," Forbes said. "To me that is both misleading and an insult."
To his credit, Nova Scotia's premier isn't preaching self-reliance these days. Instead, Rodney MacDonald is trying to persuade the federal government to preserve the benefits of the Atlantic Accord. The 2005 Accord allowed Nova Scotia to keep 100 percent of its offshore natural gas revenues without losing money from its equalization payments. (Nova Scotia now receives $1.4 billion a year in equalization, a significant chunk of the $6.4 billion the province spends.) But the Harper government is proposing a new equalization formula that
MacDonald argues would deprive the province of the full benefits of offshore revenues costing Nova Scotia hundreds of millions in reduced equalization. The feds have responded that Nova Scotia can keep the old formula if it wants, but MacDonald insists that under the Accord, the province is entitled to the full benefits of the new formula. The calculations are extremely complex, but at least two independent experts have sided with MacDonald.
While Nova Scotia has a lot at stake in this fight, it's a relatively minor issue for the feds. Equalization makes up only 5.5 percent of federal spending. (It also amounts to less than one percent of the country's total wealth.) It should be easy for Stephen Harper to keep his promise and allow Nova Scotians to enjoy the full benefits of the Atlantic Accord. Instead he's spent weeks refusing to admit that he's wrong. It's an excellent reason for booting him out when the next federal election rolls around.
We await your handouts. Email: email@example.com.