The Illiberal Origins of Confederation

Over at Mises.ca

I would like to comment on Dr. Bragues’ post on Canada’s classical liberal roots. I am unfamiliar with the work of Janet Ajzenstat to which Dr. Bragues refers but I thought I would share some of my own thoughts on the subject based off my own limited reading of Canadian history.

As I understand, confederation of the provinces under one federal state in Ottawa served the interests of federal politicians and powerful business leaders including railway-men and bankers. Confederation resulted in a larger tax base from which the state and its big business allies could fund large-scale infrastructure projects such as railways. Concerned about American expansion into the west, the Canadian government promised to build the Canadian Pacific Railway to bring the area under the control of Canadian farmers and settlers. This would be paid for largely at tax payers’ expense. Prince Edward Island received a similar deal in exchange for its joining Confederation. I’ve written a bit more about the CPR and its close ties to the Canadian state here.

After Confederation the federal government assumed all provincial debts. This subsidized financially irresponsible provinces at the cost of the relatively more thrifty ones. For a similar reason the two provinces of Upper and Lower Canada united in 1841 into the Province of Canada. Upper Canada was then nearly bankrupt from funding the Welland Canal project and needed to spread its debt geographically and financially onto Lower Canada to raise revenue and increase its international credit rating. In 1867 the greater taxing ability of the new Canadian state gave it easier access to credit from international banks. As Tom Naylor quotes Harold Innis, “Constitutions, statues, supreme court and privy council decisions are credit instruments.” (Naylor, Tom. The History of Canadian Business: 1867 – 1914, Volume I, The banks and finance capital, Toronto: James Lorimer and Company, 1975)

After Confederation, Ottawa assigned to itself many powers that were until then delegated to the provinces. The federal government granted itself control over currency, banking, commerce, major tax sources, transport infrastructure, and all lands and resources of western Canada. The provincial governments were left with the ability to directly tax and given a small head subsidy, originally $0.8 a head. Furthermore, Ottawa also assumed the power of dis-allowance over provincial assemblies, a power that it used with greater frequency than the London imperial government. Most notably, Ottawa disallowed legislation 42 times in British Columbia and 29 times in Manitoba from 1967 – 1905.

Centralization of government will tend to lead to more taxes, spending and debt. Taxes, spending and debt lead to centralization of government. Canada is no exception. I do not know enough about the Fathers of Confederation or their personal thoughts on negative rights or personal freedoms to challenge the claims of someone who has studied the issue in so much depth, but it seems to me that given the current state of affairs, belief in these ideals by our political leaders alone is not enough to preserve those ideals.

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