Government of Edward Schreyer: Democratic Socialism in Manitoba 9780773561007

Table of contents :
Contents
Illustrations
Tables
Preface
1 Introduction
2 Edward R. Schreyer
3 Legislative and Bureaucratic Reforms
4 Taxes and Spending
5 The Schreyer Government's Policies
6 Manitoba as a Political Base
7 Socialism in Canada
8 The CCF–NDP
9 Elections in Manitoba
10 The Party Organization
11 Members of the Legislative Assembly
12 The Cabinet and the Civil Service
13 Summary and Conclusions
Appendix
Notes
Bibliography
Index
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B
C
D
E
F
G
H
I
J
K
L
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Citation preview

The Government of Edward Schreyer: Democratic Socialism in Manitoba

James A. McAllister provides a fresh perspective on the role of democratic socialist ideology in Canadian politics in this study of the first NDP government of Manitoba (1969-77). The policies and performance of the administration headed by Edward Schreyer are evaluated in the light of what might be expected of a social democratic party in office. Measured by such criteria as the redistribution of wealth, the growth of public ownership, the extension of government planning, and public participation in decision making, the achievements of the Schreyer government fell short of the expectations of its supporters and the good intentions of socialist ideology. Just as significant as the lack of substantive change in these areas was the marginality of the programs and policy changes that were introduced. Reasons for the failure to create a new society in Manitoba are found in the evolution of the CCF—NDP, the organization of the provincial party, the make-up of caucus and cabinet, and the social basis of support for the NDP - so diffuse that electoral success depended largely upon the popularity of the party leader. But the dilemma of the NDP government was essentially that of any democratic socialist movement confronted by the near-impossibility of radically altering a society dominated by capitalist economic institutions while adhering to the norms of parliamentary democracy. In addition to providing insight into an important and hitherto unstudied period in provincial politics, The Government of Edward Schreyer offers a challenging reassessment of the extent to which political parties can and do bring about changes in fundamental social relations. James A. McAllister is Research Associate (Finance), Council of Ontario Universities. He was a senior member of the Planning Secretariat of Cabinet, the central planning agency of the Schreyer government of Manitoba.

To my mother and the memory of my father, Ann and Bill McAllister

The Government of Edward Schreyer Democratic Socialism in Manitoba

JAMES A. MCALLISTER

McGill-Queen's University Press Kingston and Montreal

©McGill-Queen's University Press 1984 ISBN 0-7735-0436-2 (cloth) ISBN 0-7735-0437-0 (paper) Legal deposit 4th quarter 1984 Bibliotheque nationale du Quebec Printed in Canada This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada. Publication has also been assisted by the Canada Council under its block grant program.

Canadian Cataloguing in Publication Data McAllister, James Alexander The government of Edward Schreyer Bibliography: p. Includes index. ISBN 0-7735-0436-2 (bound) - 0-7735-0437-0 (pbk.) 1. Manitoba- Politics and government- 1969-1977.* 2. New Democratic Party of Manitoba - History. 3. Socialism - Manitoba. 4. Schreyer, Edward, 1935I. Title. FC3377-M2 1984 324.27i27'o7 084-099045-6 FI063-M2 1984

Cover photo: Canapress Photo Service

Contents

Illustrations vi Tables

vii

Preface

ix

1 Introduction

3

2 Edward R. Schreyer

13

3 Legislative and Bureaucratic Reforms 20 4 Taxes and Spending 32 5 The Schreyer Government's Policies 54 6 Manitoba as a Political Base 80 7 Socialism in Canada 88 8 The CCF-NDP 95 9 Elections in Manitoba no 10 The Party Organization

125

11 Members of the Legislative Assembly 12 The Cabinet and the Civil Service 151 13 Summary and Conclusions Appendix Notes

173

189

Bibliography Index

210

201

163

142

Illustrations

FIGURES

1 Party Shares of Popular Vote 115 2 Formal Structure of the Manitoba NDP Organization 128 MAPS

1 Ethnic Distribution, Manitoba, 1971 84 2 Cabinet Ministers' Constituencies, 1969-77 153

Tables

1 Growth of the Provincial Government, Manitoba, 1958-77 37 2 Gross General Expenditure, 1968-9 and 1976-7 45 3 Personal Income and Property Tax Credit Claiming Filers in Manitoba, 1974 56 4 Manitoba Minimum Wage as a Percentage of Average Weekly Earnings 58 5 Insurance Premiums Written in Manitoba, 1970 65 6 Ethnic Composition of Canada and Manitoba 83 7 Religious Denominations in Canada and Manitoba, 1971 85 8 Provincial Election Results, Manitoba, 1920-77 in 9 Unionized Share of the Labour Force by Province, 1975 113 10 Who Would Make the Best Premier for Manitoba? 126 11 Retention of the Bureaucratic Elite, Manitoba 158 12 Previous Status of the Bureaucratic Elite, Manitoba 159 A i Income Data from Tax Returns, Manitoba, 1967 and 1972 173 A2 Occupations of Manitoba Labour Force, 1971 174

viii

Tables

A} Voting Intention and Ethnicity, Religion, and Subjective Social Class, Manitoba, 1973 175 A4 Electoral Support for Major American Parties by Major Socioeconomic Categories 176 A5 CCF/NDP Votes and Legislative Representation in Winnipeg and Rural Manitoba, 1958-77 177 A6 NDP Membership and Provincial Executive, Winnipeg and Rural Manitoba, 1961-77 177 A7 Ethnicity of Manitoba MLAS, 1962-77 178 A8 Religion of Manitoba MLAS, 1962-77 179 A9 Ages of Manitoba MLAS, 1962-77 180 Aio Occupations of Manitoba MLAS, 1962-77 181 An Education Level of Manitoba MLAS, 1962-77 182 Ai2 Growth of Provincial Governments, 1969-77 183 Ai3 Manitoba Cabinet, 1962-77 184 Ai4 Provincial Government Revenue, 1968-9 and 1976-7: Progressive and Regressive Taxes 186 A15 Estimated Joint Taxes and Federal Transfers to Manitoba, 1977-8 187

Preface

This book is an examination of the New Democratic party government of Edward R. Schreyer, premier of Manitoba from 1969 to 1977. Although his importance to the government which he led cannot be underestimated, it is not a biography of Edward Schreyer. That sort of book would be premature at this time. Although the traditions of the NDP have not been neglected in this study, it is not just a history of a political party. It is an attempt to analyse the activities of the government formed by Schreyer and his colleagues and the focus is on the behaviour of the people in that government. The most crucial questions raised in this book deal with the role of democratic socialism in modern politics, particularly when a social democratic party forms the government of a country, state, province, or even city. A problem has arisen in assessing the significance of the findings of this study, a problem which is common to all scientific research - indeed, common to human endeavours generally - and that is the question of which information is significant and which is irrelevant and trivial. Which patterns in the data are meaningful, and which are accidental or occur merely by chance? At the most abstract level, as Hans L. Zetterberg has observed, "all theoretical propositions make claims that go far beyond any data that scientists cite in their support." The problem becomes one of establishing criteria for acceptance or rejection of the proposition under consideration, criteria which may or may not be acceptable to other researchers in the field. The research and analysis undertaken for this study was plagued with similar difficulties. In the discussion which follows, evidence will be presented for and against particular propositions in an attempt to put together a pattern. For example, it was assumed from the beginning that, in most human behaviour, marked dissimilarities - indeed, contradictions - would be evident between an individual's or a group's attitudes or

x

Preface

intentions and their actions or ability to succeed. The focus of this study was on a particular group's ability to alter its environment, that is, on what results the group was able to achieve. An understanding of the motives and intentions of the political actors involved was not the primary concern. Such motivational questions were only of interest to the extent that they demonstrated how closely the political actors involved could approach, in terms of demonstrable results, their stated objectives, A problem arose, however, in assessing the significance of the deviations between intentions and results. On the one hand, those deviations might be seen as of such significance as to make the intentions of the political actors involved appear to be trivial or irrelevant. On the other hand, the deviations might be seen as temporary- something which would disappear in time — or not of such magnitude as to discredit the political actor's motivational starting point. The weight of the evidence would appear to indicate that, no matter what the motivations or intentions of the political actors under examination, the results of their efforts were quite unlike what had been stated in terms of objectives. The difficulties of the particular democratic socialist government under intensive examination, in implementing its ideology, suggest that the ideology of the political party in office had a rather limited impact on the formation and implementation of public policy. This book could not have been written without the assistance of many people. Foremost among these was Kenneth D. McRae, supervisor of the original piece of research upon which the book was based. Further guidance was provided by Leo Panitch and Bruce Doern. Several individuals were kind enough to provide me with access to their own unpublished research and they are cited in the notes and bibliography. But of particular note is Nelson Wiseman's study of the Manitoba CCF-NDP, the importance of which will be obvious to readers of this book. I would like to thank Maureen Campbell, Enid McBreairty, Diana Payton, Allan Fogg, the Manitoba NDP Provincial Office, the Manitoba Provincial Library, and the Legislative Library for their assistance in the preparation of earlier drafts. I would also like to thank two anonymous readers provided by the Social Science Federation of Canada for their most helpful comments and the people at McGill-Queen's University Press for their support and advice in bringing this book forward. Finally, I would like to thank the Institute of Public Administration of Canada for permission to publish part of chapter 4, which originally appeared in Canadian Public Administration 23, no. 3 (1980).

The Government of Edward Schreyer

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CHAPTER ONE

Introduction

There was little reason to believe, given the level of economic development and type of society in existence in Manitoba in 1969, that this province would be the first to elect a New Democratic party government - the second democratic socialist government in all of Canada. Manitoba was no more diverse culturally or reliant on the rural economy of the prairies than was Alberta. Manitoba was no more industrialized and had no more of a developing, northern frontier than Ontario. The standard of living was not as high in Manitoba as among the province's western and Ontario neighbours, but it was far superior to that in Atlantic Canada. Indeed, by most indicators of economic status, Manitoba was usually just about "average" by Canadian standards. Any characteristics which might have explained the NDP victory - cultural diversity, the prairie farm economy, industrialized cities, or developing northland - were to be found elsewhere. And yet, in 1969, Manitoba did elect an NDP government under the leadership of Edward Schreyer, the first general election won by the NDP in any province in Canada since that party was formed in 1961. It would be another two years before the NDP would win office in Saskatchewan the only province ever captured by the Co-operative Commonwealth Federation, social democratic predecessor of the NDP - and another year after that before the party would be elected to office in the province of British Columbia. The NDP would not form any other governments, provincially or federally, for the remainder of the 19705. The purpose of this book is to compare the accomplishments of Manitoba's first NDP government with the good intentions involved in socialist ideology. In so doing, it will be impossible to ignore the importance of Edward Schreyer, the man who would lead the NDP into office, head the provincial government for over eight years, and then go on to become governor general of Canada - the first avowed socialist to

4 The Government of Edward Schreyer

hold that post as well as the first person from western Canada and the first whose ethnic origin was not that of either of the country's two founding cultural entities. In order that we may compare the accomplishments of the Schreyer government with the prescribed goals of socialist ideology, it is important to have a clear understanding of what is meant by socialism or social democracy or democratic socialism — all terms which are often bandied about with little understanding of what is meant. DEFINITION OF SOCIALISM

Any review of the more significant aspects of socialist ideology would provide a multitude of conceptions of how it might be defined and implemented. For the Fabians of Great Britain, "socialism" was to be implemented gradually through elections and legislation while keeping parliamentary democracy intact. To other socialists, it was to be achieved rapidly through violent revolution. For most Marxists the vehicle for socialism was to be the centralized, working-class political party, while most Utopians saw small, self-sufficient, cooperative groups of producerconsumers as their vehicle. One attempt to define socialist ideology, in terms that might be applied to Canada, was made by C. A.R. Crosland. He identified certain moral values and aspirations which were particularly relevant to the British democratic socialist tradition, including: 1 "a protest against... material poverty and physical squalor" 2 "concern for 'social welfare' - for ... those in need, or oppressed, or unfortunate" 3 "a belief in equality and the 'classless society'" 4 "a rejection of competitive antagonism, and an ideal of fraternity and co-operation" 5 "protest against the inefficiencies of capitalism ... notably its ... mass unemployment"1

Accompanying these tenets for democratic socialists was a belief in liberty and democracy. It is possible to be more specific and to outline four goals which represent contemporary conceptions of how socialist ideals might be realized within the democratic socialist context: 1 redistribution of wealth and income to eliminate poverty and sharply reduce economic disparities between the poor and the rich 2 extension of government control and ownership of the economy through

5

Introduction

nationalization, public equity in private corporations, or legal and administrative regulation of private firms by the government 3 extension of central government planning to permit the democratic political process to direct economic activity 4 greater popular participation in government and private decision making to dilute the influence of traditional bureaucrats, special interests, and the wealthy

This attempt to define the goals of socialism raises the problem of the ability or inability of social democratic parties and governments to bring about the establishment of a social and economic system which even approximates these goals. It is all very well to put forward goals which have evolved as responses to moral ideals. It is all very well to talk about objectives which might be achieved through the implementation of certain policies. And it is all very well to draw up a sweeping indictment of contemporary capitalism. But unless the political actors involved are able to meet, or at least move in the direction of meeting, those goals and ideals and to achieve those objectives, very little is accomplished which would not have happened without the rhetoric and organizational effort. Democratic socialist theorists have long held that democracy and socialism are inseparable, that one cannot be achieved without the other. The question posed here is whether, if the democratic socialist duality is viewed as an admirable goal, it is possible to achieve a socialist society within the context of a liberal democratic political system. To assess the relevance of these questions, this book proposes to examine in some detail the implementation of democratic socialist ideology in the province of Manitoba between 1969 and 1977, the period in office of the Schreyer government. The first step in this process is to examine what, precisely, the NDP hoped to achieve when it took control of the government. This book will view the NDP government as the means through which its supporters hoped to achieve a democratic socialist society. Unfortunately, the platform on which the NDP was elected to office in 1969 did not represent a carefully worked-out plan for a major upheaval of society. Even if such a plan had been intended, the circumstances of the moment would have made such a thing unlikely. The Manitoba general election of 1969 was called in the middle of the New Democrats' leadership contest and barely three years after the previous general election. The party platform did propose reduced medical care insurance premiums, reduced automobile insurance premiums, the reduction of the voting age from twenty-one to eighteen years of age, an increased minimum wage, provision for an ombudsman, a review of proposals for

6 The Government of Edward Schreyer

hydro-electric power developments, and the reform of municipal government structures in metropolitan Winnipeg. However, a much clearer indication of the ideological position of the NDP in Manitoba can be obtained from some of the policy pronouncements made by the government and its leaders during the years immediately following the 1969 election. GUIDELINES FOR THE SEVENTIES

Foremost among these policy pronouncements was the three-volume document, Guidelines for the Seventies, published in March 1973 by the Planning and Priorities Committee of Cabinet. It was the most allinclusive policy document produced between 1969 and 1977 and demonstrated the level of understanding of social democracy current within the government of the day. Each volume of Guidelines began with a preface, signed by Premier Edward Schreyer, much of which voiced a concern about economic inequalities and for those "substantial numbers of Manitobans whose living conditions are less favourable and whose view of the future is, as a result, considerably less optimistic." The NDP was dedicated, according to Schreyer, to "bringing about more equality of opportunity and eventually more equality of condition." Schreyer's preface also stressed the importance of establishing a "concrete planning framework - substantive, rational guidelines for the development of our province." Guidelines itself was viewed as a part and a product of that planning framework. It was not to be "a static, rigid plan" but instead was to form "the basis for a dynamic, flexible plan." Finally, the premier's statement stressed the importance of "greater direct participation by the people of Manitoba in the development of the province." This was seen as an outgrowth of the publication of Guidelines itself, a publication which was intended to "encourage widespread public interest, discussion and involvement in the planning process in order that future development decisions are made in the context of a realistic examination of the issues."2 Elsewhere, belief in a greater degree of government participation in the economy was emphasized. For example, in a speech in 1971 Schreyer set out the main distinction between social democracy and liberalism as, where social problems were concerned, the former's "greater inclination, when the need is demonstrated, to use direct involvement of the instrumentality of government to solve the problem. "3 Direct reference was made to government-run telephone systems, hydro-electric utilities, and automobile insurance crown corporations. According to Schreyer, social democrats do not "believe that direct public involvement is always better. And we continue to feel that the greatest majority of enterprise

7

Introduction

should properly remain in private hands. But we are prepared to seek a better balance of the various forms of government involvement. "4 Schreyer's reference to the objectives of a democratic socialist government was developed in Guidelines for the Seventies through three volumes and over three hundred pages. For example, in its economic policies, the government indicated a commitment to full employment, to the establishment of "a Guaranteed Employment System which will act as a residual employer for all unemployed persons looking for work." By implementing its full employment policy, "the overall aim of the Government ... is to guarantee that long before 1980 the capacity will have been developed to ensure that anyone willing and able to work will be provided with a job."* During the years which followed, no such overall employment system was put into place, nor was a full-employment economy achieved. Some short-run, job-creation programs like the Provincial Employment Program and Work Activity Projects were implemented, but the comprehensive scheme outlined in Guidelines never came about. The government's attitude toward the goal of expanded government ownership of the economy was demonstrated in the proposal in Guidelines to create a system of Treasury Branches. These would have been provincially owned financial institutions, "near-banks" similar to those in Ontario and Alberta. They were aimed at helping to "stem the drain of financial resources from Manitoba and make capital more accessible to local development." It was expected that "competition in financial markets should also result in moderately lower borrowing costs to the consumer of commercial financial services.'6 Even justified as part of the infrastructure of a capitalist economy, Treasury Branches were not acceptable or popular and no such financial institutions were created. The Treasury Branches Act was passed in 1975 but the legislation was never put into effect. In the field of health care, Guidelines followed the lead of the government's 'White Paper on Health Policy, published in 1972, which called for community health centres to provide an integrated system of delivery at the local level of acute and extended hospital care, nursing homes, public health units, community mental health and related social service programs. Both integration and decentralization of services, to provide rural and remote areas with what already was available in Winnipeg, were expected to follow from the creation of community health centres. But in the face of strong opposition from the medical profession, only a handful of such centres were created, certainly only a small portion of the number needed throughout the province. All of which brings us back to the question which is the central focus of

8 The Government of Edward Schreyer

this book. Can the leaders of a political party, once elected to head a democratic government in office, bring about major and meaningful changes in the society which they are elected to lead? This book will deal with a socialist party elected to office within a predominantly free enterprise or capitalist society. A social democratic party, led by individuals who understand the democratic socialist principles upon which the party was established and acting with the support of a large portion of the electorate, takes upon itself the task of making major changes in a society dominated by capitalist economic institutions. Can it succeed? DO POLITICAL

PARTIES MATTER?

A great deal of the systematic investigation of political, social, and economic factors important in the formation of public policy has suggested that political variables exert very little independent influence on policy outputs.7 Employing what has been labelled a "structuraldeterminist mode of explanation," most studies have concluded that public policy is largely determined by socioeconomic factors.8 Referring to the Democrats and Republicans in the United States, Thomas R. Dye concluded that "parties are more products of their constituencies than they are molders of them. Socioeconomic conditions ... appear to be much more influential in determining policy outcomes than the party which is in control of the ... government. "9 However, it has also been suggested that much of the consistency of many of these findings has resulted from reliance upon a North American data base where Democratic and Republican or Liberal and Conservative politicians dominate political life. For example, one analysis of legislative outputs at the Canadian federal level concluded that "It may well be, if there had been one or more Socialist and / or working-class national governments during the time period covered by our analysis, that a direct link between changes in cabinet characteristics and legislative outputs could have been established."10 On the other hand, Robert W. Jackman went beyond North America and included the noncommunist left in his analysis of the ability of political parties to reduce economic inequalities. He found little justification for the belief that social democratic parties have any appreciable impact on the distribution of material goods in society.11 Jackman came to this conclusion in full knowledge of previous debates over the impact of social democratic parties on the distribution of material rewards. Most analysts were agreed "that these movements did at least originate with the fundamental purpose of changing that distribution in favour of the working class."12 The point at issue in the debate "centered on the extent

9

Introduction

to which this purpose has been fulfilled, and not on the extent to which this purpose was initially present."13 In opposing the view that social democratic parties do have a significant impact on the distribution of material rewards, Jackman was able to cite the opinions of a broad range of scholars including Robert Michels, Murry Edelman, Clark Kerr, and Frank Parkin. The reasons provided for the failure of socialist parties in this respect varied according to the scholar concerned. Michels believed that the leaders of social democratic parties "on achieving political power ... would become more concerned with administrative problems and with maintaining themselves in power. " I4 Edelman suggested that socialist ideals may have great symbolic value for their supporters even though no actual redistribution of material rewards may take place. Clark Kerr and his colleagues put forward the idea of the "logic of industrialism" which prevents egalitarian political ideologies, such as democratic socialism, from having any "discernible impact on social equality within industrial capitalist societies."J 5 Parties and ideologies are ineffectual because "the 'needs' of modern industrial economies will require similar differentials in earnings between occupational groups, similar mobility rates and similar government policies, etc."16 This explanation, a product of the "functionalist" school, asserts that "industrial and technological changes lead to a convergent pattern of development in the stratification systems of all advanced industrial societies, regardless of politics."17 According to what has been labelled the convergence theory of industrial society, "as societies adopt a progressively more industrial infrastructure, certain determinate processes are set in motion which make them more and more alike. Technology and economic development have their own inherent logic which has a levelling and convergent impact on diverse social structures, cultural traditions and political systems."18 Frank Parkin argued that social democratic parties "have been unable to improve the condition of the working class because they are tolerated in power only as long as they refrain from attacking or reducing the position and privileges of the dominant class."19 Parkin presented a Marxist analysis of the role of social democratic parties, a role which he saw as having "resulted in greater equality of opportunity" but which "had no marked impact on the shape of the distribution of income and other material goods."20 To the Marxist school of thought, the state is there to be dominated and controlled by the capitalist class and used by that class to maintain its economic position. In this situation, social democratic parties are allowed to use "an egalitarian rhetoric, but have rarely translated this into effective policies."21 A great deal of quantitative research has been carried out by various

io The Government of Edward Schreyer

other scholars. On a broad, macro-level, cross-sectional basis, Frederic L. Pryor compared several communist and noncommunist countries and found a lack of significant differences in patterns of public expenditure between the two sets of countries. Pryor concluded that certain "general economic features ... underlie the differences in public consumption expenditures between nations that are related neither to the system of property ownership nor to the method of resource allocation. "Zi Harold L. Wilensky examined the incidence of social welfare programs among the wealthiest nations of the world and determined that "over the long pull, economic level is the root cause of welfare-state development, but its effects are felt chiefly through demographic changes of the past century and the momentum of the programs themselves, once established."2* This is not to say, however, that all the research undertaken in this field has produced results which point in the same direction. In support of the position that political parties in general, and social democratic parties in particular, do have a significant impact on the distribution of material rewards, it is possible to cite scholars like Seymour Martin Lipset, Robert R. Alford, and Gerhard Lenski. They share the assumption "that the shape of the reward structure is open to modification through political action within the context of capitalist economies"24 and that the political preferences of the working class can be transmitted into meaningful changes in policy. Christopher Hewitt's cross-national comparisons of several countries led him to conclude that "strong socialist parties acting within a democratic framework appear to have reduced inequality in industrial societies."25 John Dryzek reached similar conclusions, but added the insight that "socialist parties are strong where non-class cleavages based on ethnicity, religion or region are weak, and that the absence of cultural differentiation facilitates the achievement of equality."26 Edward R. Tufte has presented evidence to show that major macroeconomic conditions like unemployment, inflation, income equalization, and growth of government revenues and expenditures all are effected - at least in the short run - by the timing of elections and by which party is elected to office. He found evidence of an electoraleconomic cycle which he measured by short-run accelerations in real disposable income in years in which a major national election occurred. He also found evidence of a bias in the macroeconomic policies chosen. According to Tufte, "parties of the Right favor low rates of taxation and inflation along with modest and balanced government budgets, oppose income equalization, and will trade greater unemployment for less inflation most of the time. Parties of the Left, in contrast, favor income equalization and lower unemployment, larger government budgets, and

11 Introduction

will accept increased rates of inflation in order to reduce unemployment. "27 His definition of parties of the Left was very broad and included nonsocialist parties like the Democrats in the United States. Similar conclusions were drawn by Douglas A. Hibbs, Jr. He cited empirical evidence to show "that a relatively low unemployment-high inflation macroeconomic configuration is associated with substantial relative and absolute improvements in the economic well-being of the poor and, more generally, exerts powerful equalizing effects on the distribution of personal income."28 He then proceeded to review the relevant macroeconomic conditions and political parties in office in twelve industrial countries in North America and western Europe during the 19605. He concluded that "nations in which Social Democratic and Labor parties have governed for most or much of the postwar period have generally experienced high rates of inflation" and "low rates of unemployment."29 His prime examples were Sweden, Finland, Norway, Denmark, and the Netherlands. At the other extreme were countries with low rates of inflation and high rates of unemployment, as in the United States and Canada which were "governed primarily by center and right-wing parties."30 In those cases, Hibbs found that the more conservative party - at least in the United States - was more likely to favour low inflation and high unemployment than its more liberal opponent. Research more specifically related to Canada has included that of Falcone and Mishler, who analysed health policy at the provincial level, and concluded that political processes were as important as the socioeconomic environment.31 Mishler and Campbell reported similar results but also noted that, during the period from 1920 to 1970, as provincial and federal governments became increasingly involved in the health care field, the variance between provinces became less. That is, by the 19705, provincial governments had become broadly similar in the amount of their resources designated for health care.32 Similar results were reported by Richard Simeon and E. Robert Miller. They examined provincial spending patterns between 1956 and 1974 and concluded that there was a "very high degree of convergence among the provinces in their spending patterns over a nineteen-year period. The growing similarity is strongest in total government activity, and in the largest and most expensive fields of health, education and welfare."33 In spite of this overall convergence of expenditure priorities, they also cited research "which finds dramatic increases in social welfare spending in British Columbia, Manitoba and Saskatchewan immediately after the accession to power of NDP governments. These regimes, however, are not distinctive in other spending areas. "34 Simeon and Miller pointed to these increases in welfare spending as conclusive evidence that politics does matter.

12 The Government of Edward Schreyer

The purpose of this study, like that of many of the research projects referred to above, is to determine what degree of success political parties in general and social democratic parties in particular can achieve in attaining their goals. After identifying the extent of the gap, if any, between democratic socialist ideals and what was actually achieved, I will attempt to explain or at least provide some reasons for the findings. The methodology employed has been to examine in detail the public policy outputs of the democratic socialist government in office in Manitoba between 1969 and 1977 and to compare them with those of nonsocialist governments both within Manitoba and in other provinces. Before doing so, however, it will be useful to look more closely at the central character in the story of the NDP government in Manitoba.

CHAPTER TWO

Edward R. Schreyer

THE ROAD TO V I C T O R Y

The year 1969 opened with the Conservatives seemingly secure in their grip on the Manitoba provincial government, the Liberal Official Opposition ineffectual, and the NDP confused, divided, and facing a leadership convention in June. In four by-elections held during February, the Conservatives won three of the ridings, the Liberals none, and the NDP candidate, Joe Borowski, picked up the northern riding of Churchill. This followed Conservative Premier Walter Weir's performance at a federal-provincial conference where, by taking a position viewed as "anti-French Canadian" and confronting Prime Minister Trudeau on constitutional issues, Weir supposedly gained popularity for the Conservative government. In the aftermath of the by-elections, the Manitoba Liberal leader, Gil Molgat, a French Canadian, resigned the party leadership. The Liberals elected their new leader, Robert Bend, a couple of months later but chose a 5 5-year-old man who had been out of active politics for almost a decade and who represented the rural, more conservative wing of the party. A younger, more progressive candidate who might have had more appeal in urban constituencies was available, but was defeated in the leadership contest. The result was the emergence of a large group of young, progressive, urban-oriented Liberals who found little that was attractive in the Manitoba Liberal party. Just the sort of people with whom Pierre Elliott Trudeau had been so popular in the federal election a year earlier, they now found the party of Trudeau to be inhospitable at the provincial level. For the NDP, the first half of 1969 was spent preparing for the leadership convention in late June. That there would be two major contestants, Sid Green and Ed Schreyer, was not confirmed until early in

14 The Government of Edward Schreyer

May. But soon afterward, the Conservative premier dissolved the legislature and called an election for the last week in June, barely three years after the previous provincial general election. The NDP had to move the leadership convention forward to 7 June, to permit the victor an adequate time to campaign. But holding a leadership convention just two and a half weeks before the election provided the party with invaluable television exposure at a crucial point in the campaign. Schreyer's performance electrified those who saw the first Manitoba NDP convention to be televised. He defeated Green, 506 to 177. By the eve of the election, it was clear that the NDP were going to make gains, that the Liberals were in trouble, and that the Conservatives were in danger of losing their majority in the Legislative Assembly. For the first time, there was a social democratic party (NDP) candidate in every riding in the province. Schreyer himself is said to have predicted that the NDP would win between twenty-two and twenty-eight seats of the fifty-seven contested, a substantial increase from the eleven MLAS elected in 1966.* Schreyer's appeal was that of a young, attractive, well-educated, progressive leader in the mould of a John F. Kennedy or a Pierre Elliott Trudeau. A moderate who would not frighten away potential supporters, Schreyer was often contrasted with Sid Green who, for reasons seemingly unrelated to his ideological position, was cast in the role of a dangerous radical. "Schreyer was regarded by some as too conservative, right-wing and even Liberal. Green's detractors saw him as too radical, left-wing and of the extreme Left. There is no question that Schreyer's image was more accurate than Green's. Schreyer was as conservative by nature as he was liberal and / or socialist politically. "2 A farm boy who could appeal to rural voters, Schreyer was expected to gain support outside of metropolitan Winnipeg from people who might otherwise never vote for the NDP. A Roman Catholic member of an ethnic minority, familiar with the language and customs of other ethnic groups, and supportive of bilingualism and the rights of Franco-Manitobans, Schreyer could appeal to cultural minorities who had previously voted for the Liberals, Conservatives, or even Social Credit. In effect, Schreyer was the perfect candidate for the moment. Social democrats, after fifty years in the electoral wilderness, were not about to throw away their best chance at success at the polls. The NDP mounted its strongest campaign up to that date. In many parts of the province, it involved a whole section of society which had previously restricted its political involvement to voting on election day. Hundreds of Liberal party members and supporters, alienated by their party's conservative leadership, switched their support to the NDP. They had little trouble in

15

Edward R. Schreyer

seeing, in Ed Schreyer, the sort of liberal leader that their own party was lacking. On election day, the NDP won twenty-eight seats in the legislature, the Conservatives twenty-two (down from thirty-one) and the Liberals five (compared to thirteen). There was also one Social Credit and one Independent MLA. This turnaround was based upon one voter in every six switching his or her support from some other party to the NDP. The biggest losses were suffered by the Liberals, whose leader was personally defeated and who lost almost 30 per cent of the support they had held in the 1966 election. Conservative losses were much less, but even their support declined by more than 10 per cent from 1966. Social Credit lost most of its previous support, outside of the heavily Mennonite, southern Manitoba riding of Rhineland. In the aftermath of the election, the Conservatives attempted to form a coalition with the remaining Liberal MLAS. But this failed when Larry Desjardins, a Franco-Manitoban Liberal MLA from the predominantly French-speaking riding of St Boniface, agreed to support a Schreyer government. Although initially sitting as a Liberal-Democrat, Desjardins eventually joined both the NDP and the cabinet. Desjardins' support was enough to give Schreyer twenty-nine seats, compared to twenty-eight for the Opposition - a bare majority, but a majority nevertheless. The NDP victory was the first of a series of election victories for the party at the provincial level. First in Manitoba, and then in Saskatchewan in 1971 and in British Columbia in 1972, the NDP achieved a higher level of electoral support than ever before. In Manitoba, Edward Schreyer became premier after spending seven years as a member of the provincial legislature - first for the CCF and later for the NDP - and then three and a half years as a member of Parliament in Ottawa. Who was the new premier and how had he arrived at his position in public life? THE

EARLY YEARS

Edward Richard Schreyer was born on 21 December 1935, the son of John and Elizabeth (Gottfried) Schreyer. The Schreyers were a farming family of German-Austrian ethnic origin and Roman Catholic religious background. Edward was a member of the third generation of the family to live in the area around Beausejour, Manitoba, about thirty miles northeast of Winnipeg. His four brothers, his sister, and he were not born into a particularly hospitable environment. North America was in the midst of the Great Depression of the "Dirty Thirties" and the farming area around Beausejour was one of the less affluent parts of the province. In a society dominated by an Anglo-Saxon, Protestant majority, led

16 The Government of Edward Schreyer

by business interests in Winnipeg and other urban centres, the Schreyer family shared none of these characteristics. The area around Beausejour was a mixture of varied ethnic and religious groups. The Germans were the largest ethnic group, but there were almost as many Poles and Ukrainians. Most people were either Lutheran, Roman Catholic, or Ukrainian Catholic in their religious beliefs. Growing up in this kind of community - rural, farming, less than affluent, culturally heterogeneous - could not but have had a major impact on Schreyer's view of society. Schreyer received his early education in a one-room country school and in the high school in Beausejour. It was perhaps his attitude toward education that set him apart from the people among whom he grew up. In a community where a majority of the adults had not completed elementary school and where most young people dropped out before completing high school, Edward Schreyer was one of a mere handful of people to go on to university. He attended United College (now the University of Winnipeg) and St John's College, the United Church and Anglican Church colleges respectively of the University of Manitoba, as well as the university itself. Besides the BA degree, he was eventually to earn degrees in education and a Master of Arts degree in political science. Given the relatively low level of education of Canadians generally at this time and the even more restricted access to higher education which was common in rural Manitoba, Schreyer's ability to gain a university education was significant. Not one Manitoban in twenty had been to university, and even fewer had acquired a degree. In a rural area like southern Manitoba, outside of metropolitan Winnipeg, the number who had gone to university would have been as little as one person in forty, that is, two or three per cent of the population. Several social theorists have noted the growing significance of people who, like Schreyer, have achieved access to professional occupations, the "white collar" group of administrative, scientific, and professional workers. In 1971, they made up about one-sixth of the labour force in Manitoba, were growing in numbers and percentage of the workforce, enjoyed income levels much above average - especially doctors, dentists, and lawyers - and were much better educated than the population in general.3 Members of this group are becoming more closely tied to governments or other nonprofit institutions as a source of livelihood. They are said to have a view of political activity unlike that of most of the population. Studies elsewhere have shown that members of this group are more informed about politics. In the words of Gabriel A. Almond and Sidney Verba, they are considered "to be aware of the impact of government, to have information about government, to follow politics in the various media; to have political opinions on a wide range of subjects; and to engage in political discussions. The more highly educated are also more likely to consider

i/

Edward R. Schreyer

themselves competent to influence the government and free to engage in political discussions."4 The highly educated are more likely to feel that they can influence government and have a greater belief in the effectiveness of parliamentary democracy. This belief in parliamentary government will be unaffected by their actual ability or inability to influence government decision making. The type and level of education also may help to determine an individual's political views. At least part of this group has been referred to as the new working class or new middle class. Its interests have been viewed as being in conflict with those of the traditional middle class, and the new class is therefore seen as opposed to the conservative political Right and allied with the progressive political Left. In one study of contemporary France, by R. A. Pitts, the new working class is regarded as a supporter of the parliamentary system and of left-wing political parties.5 In France, that might lead to support of the Communist party, but in most countries and in Manitoba the new class would be expected to support social democratic parties like the CCF and NDP. Closely allied to the theory of the new working class is the concept of the post-industrial society. According to one of its principal exponents, Daniel Bell, the post-industrial society is a knowledge society which relies on research and development work for innovation and devotes an increasing proportion of its resources to the collection and dissemination of knowledge. As the post-industrial society develops, Bell predicts, there will be significant growth in what he terms the "third sector" - neither government nor the private sector but schools, universities, hospitals, research institutes, voluntary and civic associations.6 In Manitoba, in the 1950$, the growing significance of this group would not have been so obvious. Certainly Schreyer's decision to attend university identified him with the new working class and his choice of political science as a course of study demonstrates the sort of political attitudes described by Almond and Verba. His return to Beausejour to teach school also placed him in what Bell referred to as the "third sector." Indeed, Schreyer might have remained a school teacher in Beausejour to this day, perhaps becoming a school principal and, later, even the superintendent of the local school division. But Schreyer's interest in politics intervened. At the age of eighteen he had written to the CCF provincial office to apply for membership in the party.7 In 1957, he was campaign manager for Jake Schulz, CCF candidate in the general election in the federal riding of Springfield, in which Beausejour was located. It was, perhaps, his association with Jake Schulz which was most crucial at this early stage in Schreyer's political career. In 1960, he was to marry Schulz's daughter, Lily, and when Premier, he would hire Schulz's son as an executive assistant.

18 The Government of Edward Schreyer

Schulz did not live in the Beausejour area. A man of German ethnic origin who had migrated to Canada from the Soviet Union in 1930, Schulz settled on a farm near Grandview, in northwest Manitoba, not far from the Saskatchewan border.8 In 1957 the Grandview area was already represented by a CCF member of Parliament, but Schulz was able to gain the CCF nomination and get elected in the Springfield riding, northeast of Winnipeg, because he had founded and spent several years organizing the Manitoba Farmers' Union. When the MFU was created in the late 19405, the province's farming community was dominated by the Manitoba Federation of Agriculture and Co-operation. The federation usually supported the Liberal party, which was then in office at both the provincial and federal levels. The MFU drew much of its strength from those farmers who supported the CCF but it had expanded its support and by 1953 had about 30,000 members.9 Schulz did not remain an MP for very long, being defeated in the Diefenbaker landslide of 1958 when the Conservatives captured all fourteen seats from Manitoba. But the importance of his role as Ed Schreyer's mentor cannot be overestimated. A year after Schulz was elected to the House of Commons, Schreyer was elected as a CCF member of the Legislative Assembly of Manitoba. Just twenty-two years old, the youngest member of the assembly, he represented the newly created riding of Brokenhead, which included the Beausejour district. Fortunately for Schreyer, the riding also included the St Clements district (along the eastern bank of the Red River north of Winnipeg) where support for the CCF was much greater than around Beausejour. When Edward Schreyer first sat as a member of the Manitoba legislature, it was as part of a CCF caucus of eleven MLAS. He was reelected as a CCF member in 1959 and then as an NDP MLA in 1962. He acted and voted in the Legislative Assembly more as an individual than as a member of the party caucus. Perhaps because of his rural constituency — most other CCF—NDP members represented ridings in metropolitan Winnipeg — Schreyer often refused to vote the same way as the other MLAS of his party. More often than any other member of the caucus, he broke with party ranks in the legislature. But he was active in party affairs, being elected chairman of the provincial CCF organization in 1960. In private life, Schreyer taught political science from 1962 until 1965 at St Paul's College, a Roman Catholic college affiliated with the University of Manitoba. In the fall of 1965, at the age of twenty-nine, Ed Schreyer became the NDP candidate in the federal riding of Springfield. In the general election which followed, Schreyer won the riding which Jake Schulz had won in 1957 and lost in 1958, and which had since been held by the Conservatives. For the first time in his life, Schreyer had to move out of Manitoba.

19 Edward R. Schreyer

His wife later recalled the move to Ottawa: "When we got there, Ed didn't like it. We never went anywhere ... We missed our friends. I think I could have adjusted but Ed's still basically a small-town boy."10 In 1968, in the federal general election which confirmed Pierre Trudeau in his position as prime minister of Canada, Ed Schreyer was reelected to the House of Commons. His old constituency of Springfield had been abolished through a redistribution of seats and Schreyer now represented the riding of Selkirk. For the first time, his constituency did not include the area around Beausejour but, instead, was predominantly urban. It included the northeast suburbs of Winnipeg - Elmwood, East Kildonan, North Kildonan - plus the town of Selkirk and a rural area running down the Red River to Lake Winnipeg. The bulk of the population was in metropolitan Winnipeg in an area with a long tradition of support for the CCF and then the NDP. Back at the provincial level in Manitoba, all three major parties were in a state of transition. In 1967, after nine years as premier, Duff Roblin resigned following an unsuccessful attempt to gain the federal leadership of the Progressive-Conservative party. His successor as Conservative leader and premier was Walter Weir, an undertaker from the small, southwestern Manitoba town of Minnedosa. In 1968, an NDP member of the legislature, Sidney Green, challenged the position of the party's provincial leader, A.R. Paulley. Although Green's challenge was unsuccessful, he lost the leadership race by a margin of only 213 to 168 votes. The result might have gone the other way except that Paulley made the unique campaign promise to resign within a year to enable Ed Schreyer to contest the leadership.11 And so began the process of electing Edward Schreyer as premier of Manitoba.

CHAPTER THREE

Legislative and Bureaucratic Reforms

"The Schreyer administration lasted for 100 months, from June, 1969 to October, 1977. " J An examination of the political and bureaucratic structures of the Manitoba government and a comparison of activity within the government before and after the 1969 election form an important part of any assessment of the Schreyer government. How similar and how different were the ways in which the cabinet operated and in which it interacted with the bureaucracy? To what extent did the cabinet serve as a body promoting radical social change? If the NDP government of Manitoba was to move in a concerted fashion to implement a social democratic program, then it would have to process much of that program through the bureaucracy, its most important aspects through the cabinet, and gain approval for the more important measures from the Legislative Assembly. A superficial examination of the activities of the Schreyer cabinet demonstrates few signs of a radically new way of running a government. For example, quantitative measures of cabinet activity — which, of course, say nothing about the quality of that activity - do little to help us distinguish between the Schreyer cabinet and its Conservative predecessors. One such quantitative measure is the number of orders-in-council approved by the cabinet each year. Here the data demonstrate no rapid increase in the level of cabinet activity; in fact, there is no significant difference whatsoever. Excluding the years 1958, 1969, and 1977 when two parties were in office during one calendar year, the yearly average was 1,736 orders-in-council for the Conservatives and 1,429 for the NDP. Another indicator worth examining is the number and content of bills put into law by the Schreyer government. Since most bills introduced into and passed by the Legislative Assembly were supported by the cabinet, most of the responsibility for the activities of the legislature from

2i

Legislative and Bureaucratic Reforms

1969 until 1977 must rest squarely with Edward Schreyer and his colleagues. LEGISLATION

In quantitative terms, the bills passed by the Legislative Assembly during the years the NDP were in office followed the pattern established by the previous Progressive Conservative government. Given the social democratic approach to government, one would have expected that the NDP, when it was in power, would make increased use of the Legislative Assembly. Presumably, the NDP would call the legislature into session more often, for longer periods of time, to deal with more bills. Those bills would be longer in terms of sheer volume and of more significance. Not one of these expectations was met. The first point to note is that the NDP called elections and the legislature into session less frequently than did their Conservative predecessors. This followed from Premier Schreyer's belief in regular elections every four years and the absence of any particular need or desire for extra sittings of the Legislative Assembly. For example, at no time between 1958 and 1969 did the Conservatives attempt to remain in office for the legal limit of five years or even for the more common length of tenure of four years. By contrast, the NDP went a full four years before calling an election in 1973, and it was almost four and a half years before they called the next election, in which they lost power to the Conservatives. In total, the Conservatives called four elections in eleven years in power, while the NDP called two elections in almost eight and a half years. The same tendency can be seen in the calling of the Legislative Assembly into session. During the Conservatives' eleven-year tenure, they held fifteen sessions of the legislature - an average of one session every eight or nine months. The NDP, on the other hand, held nine sessions in almost eight and a half years — a little more than one a year. In fact, the first of these sessions might not have been necessary had the Conservative government, in 1969, not dissolved the legislature before it had completed its major work for the purpose of calling an election. The NDP, after that initial special session, called the Legislative Assembly into session once a year as required by normal constitutional practice. The number of bills enacted by the legislature also did not change a great deal once the NDP came into office. The largest number of pieces of legislation enacted in any one year during the 19605 and 19705 occurred in 1963 when 117 public and 21 private bills were given approval. This occurred when the Conservatives were in office. Only in 1970, the first normal session in which the NDP was in power, was this matched. During

22 The Government of Edward Schreyer

that session, 125 public and 9 private bills were given approval. On the other hand, the New Democrats' second term, from 1973 until 1977, was one of the least productive, in terms of sheer volume of legislation, of any during these two decades. The number of public bills enacted during an average year declined from 102 during the first term to 67.2 during the second term. Considering the length of bills passed, in terms of number of pages, gives a slightly more favourable picture of the Schreyer government's performance. The most active term of office, of any during the two decades under surveillance, was the first term of the NDP government from 1969 until 1973. The 1970 session included 416 pages of a thoroughly rewritten Municipal Act. The 1971 session included a 338-page City of Winnipeg Act which provided, in effect, a municipal "constitution" for half the population of the province. But there was a marked decline in productivity between the first and second of the NDP government's terms of office. The number of pages of bills enacted during the second term was very much in line with the number recorded during the previous Conservative regime.2 This suggests that a social democratic party - and perhaps other parties as well — will begin its time in office with a brief flurry of activity. Any major initiatives to be undertaken will occur early in its first term. After that inaugural period, the government will devote most of its efforts to keeping itself in office. John Richards and Larry Pratt noted a similar behaviour pattern for the Saskatchewan CCF government of Tommy Douglas: "The CCF government remained in office from 1944 to 1964 but, with the important exception of a universal medical care insurance program introduced in 1962, virtually all of the major initiatives were launched in the first term - and most of them in the first two years."3 Presumably, if the Schreyer government in Manitoba had lasted as long as the Douglas government in Saskatchewan, the later terms in office would have been far less productive than the first term. It would appear that in terms of quantity of legislation, the performance of the NDP in office did not vary significantly from the Conservatives' performance, except for a burst of legislative activity during the first couple of years that the NDP was in power. The number of bills was approximately the same. The total length of that legislation approved each year was roughly equal. There was little quantitative evidence to distinguish this as a democratic socialist government, little to signify that it had evolved from philosophical traditions markedly dissimilar to those of the Conservative and Liberal governments which had preceded it. A useful perspective can be gained by comparing the Manitoba government with other provincial governments on the basis of policies

23 Legislative and Bureaucratic Reforms

and legislation. If the legislative performance of the NDP government varied little from that of its predecessors, it might be argued that this occurred because its predecessors were particularly progressive. Certainly the Conservative government of Duff Roblin, premier from 1958 until 1967, has been viewed as one of the more progressive governments in Manitoba's history, and the NDP government of Ed Schreyer has been seen by some as carrying through the progressive traditions of that administration. Interprovincial comparisons of policy innovation, on the basis of legislation approved, were made by Dale H. Poel, using the ten Canadian provinces and twenty-five policy items.4 Manitoba was the first to implement only three of the twenty-five items. The establishment of an independent provincial electoral boundaries commission by the Liberal government in 1957, the establishment of crop insurance by the Conservative government in 1959, and the lowering of the age of majority by the NDP government in 1970 all were examples of legislation passed first in Manitoba and then adopted later by other provinces. This is in contrast to Saskatchewan, which was the first to adopt ten of Poel's twenty-five policy items, among which were collective bargaining for the civil service, lowering the voting age, medical care insurance, and provincial automobile insurance. Ontario was the initial province to approve five policy items, Nova Scotia and British Columbia introduced four items each. It would appear from this analysis that Manitoba has been neither particularly aggressive in implementing such new legislation nor has it been among the least innovative. But neither has it been so progressive that a radical party elected to office would not be expected to alter Manitoba's performance in comparison with that of other provinces. Similar findings result from Poel's analysis of the time elapsed in the diffusion period of each policy item, that is, how long it took for the twenty-five pieces of legislation to be approved in each province. Once again, Saskatchewan was the most innovative as well as the most willing to adopt innovative legislation initially passed elsewhere. Once again, Ontario and British Columbia were slightly less willing to adopt new legislation than Saskatchewan but were ahead of the seven remaining provinces. But this time Manitoba was marginally ahead of Nova Scotia, with Alberta close behind. Manitoba had an average or slightly better than average performance on Poel's twenty-five items, but it was not a policy leader among Canadian provinces. It accepted and followed the lead of other provinces, particularly Saskatchewan and Ontario. It innovated very rarely, although it followed the lead of other provinces somewhat more often. In summary, the legislative behaviour of the NDP government was similar to that of Liberal and Conservative governments in office prior to

24 The Government of Edward Schreyer

1969 and not particularly innovative compared to provincial governments elsewhere. Even in comparison with a Conservative government in Ontario, the various Manitoba governments lagged behind both in introducing new legislation and in being willing to approve such legislation soon after it had been introduced elsewhere. The Schreyer government adapted itself to this status rather than attempting to depart radically from previous practice. DEPARTMENTS OF GOVERNMENT

In terms of bureaucratic reforms, what was most obvious was the degree to which the NDP was willing to leave unchanged the major structures of the Manitoba government. Of the twenty-two government departments in existence after eight years of NDP rule, sixteen had existed prior to the change of government in 1969. The NDP cabinet had, from time to time, identified parts of existing government departments as having enough importance to warrant being separated out as distinctive departments on their own. The Civil Service Commission was removed from the existing Department of Government Services while most of the latter's functions were included in the renamed Department of Public Works. The Department of Colleges and Universities was removed from the Department of Education and later renamed the Department of Continuing Education and Manpower. The Department of Co-operative Development was removed from the Department of Agriculture. The Department of Northern Affairs was perhaps the Schreyer government's most significant bureaucratic creation, having been pieced together from units of older departments and then expanded almost beyond recognition. The Department of Renewable Resources and Transportation, the last of the new departments to be created, was composed largely of units previously found in the Department of Mines, Resources and Environmental Management and resulted from the splitting of the old department into two new ones. The Department of Urban Affairs, another creation of the NDP government, served as a conduit between the provincial cabinet and the politicians and administrators of the City of Winnipeg. It had little staff and the smallest budget of any department. Finally, Corrective and Rehabilitative Services was identified as a separate ministry rather than as a full-fledged department. That is, it reported to its own cabinet minister although it never really achieved full autonomy in relation to the Department of Health and Social Development, of which it had been a part. It was also noteworthy that some programming impetus was gained through the creation of new and the expansion of existing planning and research units within some line departments.

25

Legislative and Bureaucratic Reforms

In summary, the Schreyer government produced few creative bureaucratic reforms in the area of the line departments. No consolidation of departments in existence under the Conservatives took place. Most of the departments created by the NDP government had been distinct parts of established departments and their creation arose from bureaucratic or pragmatic political sources. Democratic socialist ideology did play a role in the creation of the Department of Co-operative Development, but its budget was larger than that of only one other department, Urban Affairs. The creation of the Department of Northern Affairs can be seen to have both ideological and pragmatic rationales. It can be seen as the bureaucratic incarnation of the NDP'S attempts to aid the people of the province's economically least fortunate region. Ignoring, for the most part, the more prosperous urban centres in the north, the department's and the government's programs stressed the problems of povertystricken communities. But the large-scale provision of services, never received previously by northern residents, also had a pragmatic, partisan basis. Of the five "northern" constituencies, the NDP won four in 1969 and 1977 and carried all five northern seats in 1973. The north formed part of the core of NDP support which carried it into office, maintained it there for eight years, held firm even when the party went into opposition, and helped it form the government again in 1981. But a more important aspect of the NDP government's approach to northern development was that it did not involve challenging the major social or economic structures or interests in the north. No industries were taken over by the government - except the Churchill Forest Industries Complex at The Pas and that was on legal grounds to protect the taxpayers' investment from illegal acts by its owners - and no redistribution of wealth took place within the north. Under the NDP a greater share of the province's total wealth was spent on services to northern residents. The total amounts of government services and benefits provided to this one region were increased, but no attempt was made to redistribute benefits within the region itself. CENTRAL AGENCIES

Outside of the regular departments of government, things also remained much the same as before the NDP came into office. Those agencies which reported directly to the cabinet in an advisory or "staff" capacity are of special interest. Whereas line departments administer direct services to the public, "staff" bureaucracies usually act in the capacity of advisers to the cabinet, giving advice, doing research, and carrying out the ministers' instructions by working through line departments. Manitoba first had a cabinet clerk from 1945 until 1949. He attended meetings of the cabinet

26 The Government of Edward Schreyer

and made notes although he did not keep formal minutes. The post of clerk of the Executive Council was reestablished in 1958, and, in 1959, the Treasury Board became the financial committee of the cabinet.5 Staff bureaucracies are an ideal place to begin the implementation of a social democratic program. But staff bureaucracies are found, at least in rudimentary form, in all sorts of political systems, socialist and nonsocialist alike. They may take the form of a Department of the Treasury or of Finance whose role is to ensure a politically desirable relationship between revenues and expenditures. In Canada, within many of the federal and provincial jurisdictions, three specialized types of agencies have arisen either as part of or in addition to the Treasury or Finance departments: 1 Offices of the Head of the Government. The Prime Minister's Office in Ottawa and the Premier's Office in several of the provinces all report directly to the head of the government in power. 2 Offices of Central Management and Expenditure Control. The Treasury Board in Ottawa is found in similar structures in the provinces, including the Schreyer government's Management Committee of Cabinet. 3 Offices of Central Program Planning and Evaluation. The Privy Council Office in Ottawa is duplicated elsewhere, including the Planning Secretariat of the cabinet in Manitoba under the NDP.

All of these central structures have one common characteristic. They all are responsible directly to the head of the government or standing committees of the cabinet. Prime Minister's or Premier's offices usually will report to the head of the government. Management and planning structures usually will report to a committee or committees of cabinet ministers which may or may not be chaired by the head of the government. Much of the work of ministers, outside their own particular departments, is done in cabinet committees and subcommittees in which only a minority of ministers can make an input into any one decision. These cabinet committees will form the linkage between staff bureaucracies and the cabinet. The growth of these central structures has underlined the importance of the federal prime minister and the provincial prime ministers or premiers within the cabinet. In Manitoba during the Schreyer government, for instance, ministers were known to refer to the premier as "my boss" or "the boss." One of Schreyer's cabinet ministers was later to describe the relationship between Schreyer and his ministers: There is nothing democratic about the Cabinet form of government. Although each minister is an elected member of the legislature, he is selected by the party

27 Legislative and Bureaucratic Reforms leader for a Cabinet assignment. This gives the Premier, as first minister, immense power. He can make or break his ministers. This power to choose the Cabinet, combined with the ultimate right to call a general election, makes the Premier the supreme power in the province. As the one who chairs the weekly Cabinet meetings, the Premier not only controls the agenda and the speakers, but he and he alone interprets the consensus. Only on rare occasions is a vote taken and then usually on a minor matter. Thus the leader's personality and style mark his administration.6

The staff bureaucracies have become more important because of what Peter Aucoin has labelled the "departmentalization" of public policy, the tendency "to deal with specific policies within the confines of the department most responsible for administering them. "7 To counteract this departmentalization and to reassert the primacy of the collective cabinet, to alter existing relationships between the cabinet and the civil service, staff bureaucracies have been created. As Aucoin has said of the expansion of the PMO and PCO in Ottawa, staff bureaucracies have become more important because "it was considered important that the Cabinet be afforded the opportunity to have the advice it receives from individual departments and agencies assessed by units not committed to the institutional concerns of the regular departmental civil service."8 In Manitoba, the essential form of the central bureaucracies was established during the last years of the Conservative administration of Premier Walter Weir. In terms of the cabinet itself, that included a Management Committee of Cabinet and a Planning and Priorities Committee of Cabinet.9 Each of these committees was served by staff which, along with the Premier's Office, formed part of a Department of the Executive Council. The response of the NDP was not terribly innovative. The personnel involved in both the Premier's Office and the PPCC Secretariat were almost completely changed during the NDP'S first term in office. A noticeable exception was the clerk of the Executive Council, Derek Bedson, who continued to hold that position throughout the Schreyer years and beyond. Bedson was a long-time Conservative who had been hired when Duff Roblin was premier. He continued to attend cabinet meetings throughout the Schreyer government's time in office, later performed the same function for the Conservative government of Sterling Lyon, and then went on to perform a similar function for the Conservative government in Saskatchewan in the early 19805. Similarly, the Secretariat reporting to Management Committee of Cabinet remained essentially unchanged and served as a highly conservative force within the government throughout the NDP regime. The structural reforms of the Planning and Priorities Committee of Cabinet entailed, in 1970, a subdivision of the staff support group into a

28 The Government of Edward Schreyer

Continuing Programs Secretariat and a Planning Secretariat. The former group was composed largely of staff who had worked for the Conservative administration and was heavily involved with federal-provincial cost-sharing arrangements. The latter group was headed by John C. Weldon, an economics professor from McGill University and a longtime member of the CCF and NDP. In 1972, most of the staff of the Continuing Programs Secretariat were transferred to various line departments and, in 1973, the PPCC Secretariat became the Planning Secretariat of Cabinet and was divided into several subgroups, each of which was involved in a separate policy and program area. The Planning and Priorities Committee of Cabinet itself was dissolved and replaced by a committee of the whole cabinet, meeting in "Cabinet Planning Session." Reporting to this planning committee were several cabinet subcommittees, the most prominent of which dealt with Resources and Economic Development; Health, Education and Social Policy; and Manpower, Employment and Immigration. Other subcommittees struck included those involved with Planning and Land Use, Regional Development, Indian and Metis Affairs, Equal Opportunities, and Legislation. Each of these cabinet committees and subcommittees received support from staff employed by the Planning Secretariat. There was also an Urban Affairs Committee and a Winter Works Committee which were less closely related to the Planning Secretariat of Cabinet. The Planning Secretariat and its work for the NDP differed from that of the PPCC operated by the Conservatives in at least two ways. First, after 1973, the Planning Secretariat reported to a Committee-of-the-Whole Cabinet (not just a committee of a few ministers) and to several policy subcommittees. This raised the profile of the planning process, by involving the entire cabinet, and gave the Planning Secretariat staff multiple points of entry into the cabinet through the committee chairman, the premier, and each of the subcommittee chairmen. According to Kenneth Bryden, "there was a clear ideological component in the Manitoba decision to abolish the Planning and Priorities Committee."10 However, pragmatic political and bureaucratic concerns were at least as relevant. A desire for a broader political and bureaucratic input into cabinet planning processes and a desire for a higher profile for planning concerns brought with it a higher profile for the people doing the planning. The second major point of difference between the Conservative PPCC and the NDP Planning Secretariat was in the composition of the staff support for the cabinet committees. Most of the staff hired from 1969 onwards were at least sympathetic to the NDP. Some were avid party workers and even those who privately supported some other political party were not far removed from the NDP'S political philosophy. Most of

29 Legislative and Bureaucratic Reforms

the support staff also shared a common social science academic training, usually in economics or political science, with only a few people on staff trained in engineering, architecture, or other fields. There were usually, at any one time, enough people with PH D or at least MA degrees to staff a moderately large university department of economics or political science. And, in fact, many of the staff were university faculty either before or after the time they worked for the Planning Secretariat. These staff characteristics were, to a large degree, the product of the recruitment practices employed by the PPCC and Planning Secretaries. J.C. Weldon played the key role in establishing recruitment practices aimed at hiring people who were both ideologicall progressive and academically qualified. His successor, Marc Eliesen, had been a researcher for the NDP caucus in the House of Commons. The last cabinet planning secretary, Wilson Parasiuk, became active in the NDP while working for the PPCC Secretariat, ran unsuccessfully for the party in 1973, and was elected as an NDP MLA in 1977. He was reelected in 1981 and became a cabinet minister in the government of Howard Pawley. His academic training was in the social sciences; he was a Rhodes Scholar and holds a graduate degree in political science. As an agent of political change, as the "brains trust" of social democracy in Manitoba, the PPCC / Planning Secretariat had few successes. It rarely enjoyed a sufficient level of confidence, on the part of the cabinet, to initiate programs and carry them through to implementation. It could initiate new policies, but anything beyond the most preliminary of discussions had to be put into effect by the line departments. Perhaps a final comment on its inability to initiate new programs was that, after the Conservative government of Sterling Lyon had abolished the Planning Secretariat in 1977 and the Management Committee in 1978, the NDP government of Howard Pawley did not reestablish either organization. Central planning agencies, at least in Manitoba, appeared to be more effective as evaluators and review agencies for proposals emanating from line departments, as checks on the activities of the major departments. Yet the ambiguity of their role left the PPCC / Planning Secretariat staff, as well as the committees to whom they reported, unsure of their responsibilities. Also of note was Manitoba's almost total failure, in the period from 1969 to 1977, to implement any of the standard techniques for increasing accountability and efficiency. By comparison, at the federal level, major alterations took place in the budgetary process through the implementation of the Planning, Programming and Budgeting System (PPBS). While the Liberal party in Quebec, as well as at the federal level, and the Conservative party in Ontario implemented versions of PPBS, the NDP in Manitoba did not even attempt such a process. This is not to accept PPBS as a panacea for

30 The Government of Edward Schreyer

government problems. A similar fate befell Management By Objectives and every other administrative technique current during the late 19605 and early and mid-19705. It is just a reflection of the Schreyer government's attitude toward bureaucratic innovation. CROWN CORPORATIONS

Another area in which to look for governmental reforms is outside the civil service proper, in the crown corporations, boards, commissions, and agencies operated by the provincial government. The largest of these, the Manitoba Hydro-Electric Board and the Manitoba Telephone System, had been in place since 1919 and 1906 respectively. Although many of the development decisions of Manitoba Hydro were the subject of great controversy, it was not because of any internal, bureaucratic reforms undertaken. More creative was the establishment of new agencies, such as the Manitoba Public Insurance Corporation, the organization providing government automobile insurance. The Communities Economic Development Fund attempted to stimulate and establish local businesses in northern Manitoba. But it was doing a job which could have been done by the Manitoba Development Corporation, an agency carried over from the days of the Conservative government. Manitoba Forestry Resources evolved out of the provincial government's take-over of the Churchill Forest Industries complex at The Pas. The Manitoba Trading Corporation sought to stimulate business within Manitoba by increasing exports, hardly an original idea or one particularly attached to democratic socialism. The Leaf Rapids Development Corporation performed the task of creating a town in northern Manitoba to service a mine site, a task usually performed by private interests. Meanwhile, the mine itself remained in private hands, while the government simply took on some of the costs and risks of providing housing and other services in a one-industry remote community. Channel Area Loggers and Moose Lake Loggers both attempted to provide jobs in remote, northern communities. But both were relatively small operations providing few jobs at a high cost per job. Manitoba Mineral Resources attempted to inject the public sector into the field of mining exploration. It assumed part of the financial risks, but resulted in little benefit to the public by way of economically feasible mining operations. None of these organizations had particularly wide-scale effects on the Manitoba economy or on the people of the province. By comparison with the much older, government-owned Hydro and Telephones, their scale of operations was minuscule. The picture which emerges of the NDP in office in Manitoba is of a government unable or unwilling to make more

31

Legislative and Bureaucratic Reforms

than marginal changes in its day to day operational activities. Levels of cabinet activity and government structures were similar to those of the preceding administration. What changes did occur were highly selective in their impact on either structures or personnel. Creation of the Department of Northern Affairs, changes in the central planning agency, establishment of several new crown corporations, including the Manitoba Public Insurance Corporation, and recruitment of a small number of politically sympathetic public servants were probably the most significant changes. Meanwhile, most of the bureaucratic apparatus continued to operate almost as if there had been no change in the party in office.

CHAPTER FOUR

Taxes and Spending

Does a picture similar to the one outlined in the preceding chapter emerge if one examines the public policy outputs of the Schreyer government? The most extensive indicators of those outputs were the financial decisions, and the results of those decisions, made by the government's senior bureaucrats and political leaders. Those financial decisions are documented in the statements of revenue and expenditure published by most modern governments, and they should reflect the distribution of interests and resources within society. These documents provide "one very useful way of estimating the nature of governmental activities and priorities. The fact of limited resources means that expenditure decisions will to a large extent reflect these priorities." Within Canada, "by comparing expenditures over time and across provinces, one can analyze the changing importance of policy areas as well as the differences in policy priorities from one province to the next."1 GROWTH OF GOVERNMENT SPENDING

Thef e is no doubt that in every province of Canada the total expenditures of government, and the revenue raised to pay for those expenditures, grew more or less consistently for decades prior to the election of the New Democratic party government in Manitoba in 1969. As Richard M. Bird wrote at about that time, "provincial and municipal expenditure (especially the former), although strongly affected by the depression of the i93o's, grew more or less steadily and rapidly over most of the 6o-year period (1906-1967) for which data are available."2 In virtually every province, the total level of government expenditures in each year was greater than it had been during the previous year and the ratio of total government expenditures to the Gross National Product likewise

33 Taxes and Spending

increased more or less consistently. Government expenditures came to account for an increasing share of the total goods and services produced by the nation as a whole. Within Canada, The ratio of total government expenditure to GNP between 1870 and 1967 (excluding the war and depression years) appears to be largely "explained" by the level of real per capita income. War, depression, changes of government - all these, one might think, must have altered the expenditure ratio over such a long period of time. Yet these factors seem to have had slight effect compared to the influence of the increase in the real per capita income of Canadians over the past century- and the myriad changes in technology, knowledge, economic structure, population structure and ideology, which have caused, accompanied and followed that increase!3

As the economy grew, government came to claim a greater share of the nation's resources. A multitude of explanations for this phenomenon have been offered. In the nineteenth century, Adolph Wagner formulated a law of expanding government expenditures which asserted that "as per capita income rises in industrializing nations, their public sectors will grow in relative importance."4 This occurred because of increased administrative and protective needs met through the regulation of an industrialized, urbanized society. It occurred also because of the demand for better education facilities, better social welfare guarantees, and because of the role of government in creating pools of capital to finance large-scale public monopolies. In a much more recent, Marxist explanation for the growth of government expenditures, James O'Connor suggests that "the socialization of costs and the private appropriation of profits creates a fiscal crisis, or 'structural gap' between state expenditures and state revenues. The result is a tendency for state expenditures to increase more rapidly than the means of financing them."5 This situation is made worse by demands that government resources be used to support projects developed by and for particular business interests. O'Connor argues that some part of the business community and organized labour have worked to transfer the costs of social needs into the public sector. Each time one of the costs of these social needs is so transferred, there is little or no corresponding increase in revenue flowing to government. Additional sources of taxation then must be added to support the continually increasing level of government expenditures. Differences between countries, in terms of the size of their public sectors and the rate of growth of governments, have also been noted. Even among the advanced capitalist countries of North America and Western Europe, marked variations exist in the size and relative growth

34 The Government of Edward Schreyer

of government. David R. Cameron has suggested that "the best explanation of why public authorities in some nations have expanded their control over the appropriation and allocation of resources while those in other nations have not is international in character."6 He demonstrated that "the expansion of the public economy was most closely associated with a relatively high exposure to, and dependence upon, external producers and consumers." That is, the more "open" the country's economy, the greater the increase in the relative size of the public sector. Open economies exist in countries where "there is a high degree of substitution of foreign and domestic goods, with domestic prices of commodities, labor and capital established by supply and demand in the international rather than the domestic market." Open economies are "exposed to pressures on markets and prices which are transmitted from other nations via international exchange." The intervention of government to dampen the effects of an open economy then follows in the form of "social security schemes, health insurance, unemployment benefits, job training, employment subsidies to firms, and even investment capital. "7 In some cases, particularly the Scandinavian countries and Britain, this is accompanied by the election of democratic socialist governments. In other countries, including Canada, large-scale growth of government occurs without social democratic parties coming into office at the national level. Other explanations look to the governmental apparatus itself for an answer as to why the public sector continues to expand in most countries. For example, Anthony Downs, James Buchanan, and Richard Wagner have offered a fiscal explanation which emphasizes certain features of the tax system.8 The costs and benefits of public policies are not directly linked and this is nowhere more true than in the case of those forms of government revenue which are not easily visible, for example, indirect taxes. People may be hardly aware of the costs involved or the taxes they are paying, but are constantly reminded by politicians and bureaucrats of the benefits received. Downs, William Niskanen, and Aaron Wildavsky have offered an institutional explanation which suggests that government agencies have to deal with internal pressures which lead to expansion, "empire building," and career advancement for bureaucrats. Another sort of institutional explanation stresses the degree of fiscal decentralization. Federal political systems in which the states or provinces are strong in relation to the national government will tend to have the highest rate of growth in spending. Finally, there are the various political explanations of government spending growth which were discussed in chapter i. Political parties and ideologies of the Left have been seen as instigators and supporters of a

3 5 Taxes and Spending massive increase in the size of the public economy. Labour and socialist parties - democratic or otherwise — as well as centrist or mildly leftist parties like the Liberals in Canada and the Democrats in the United States all are viewed as supporting increased government expenditures, in contrasted to their conservative opponents who generally attempt to restrict the growth of the public sector. Another sort of political explanation relates not to the ideologies of the parties but to the degree of electoral competitiveness between those parties. Increased government expenditures are viewed as a result of parties competing for votes by offering new and expanded government programs to the voters. Following the logic of this explanation, the more equal in strength the major parties find themselves, the more competitive the party system, then the more promises the parties will make and those promises will lead to growth in government spending. Reference has already been made in chapter i to the work of Edward R. Tufte, who related the macroeconomic policies of governments to the timing of elections. Government spending, unemployment, and inflation all can be controlled in the short run by government in such a manner as to increase the chances of its reelection - this is what has been referred to as a political business cycle. The various explanations for increases in public expenditures are important because they explain that growth in terms that may have little or nothing to do with the abilities or attitudes of the politicians or bureaucrats involved. This is particularly true of those explanations that are based upon economic growth, social structure, international trade, the tax system, bureaucratic institutional pressures, fiscal decentralization, or even a competitive party system. In each of these cases, the political or bureaucratic actor has very little actual control over the government apparatus. In the words of Rudolf Klein, "To discuss the political factors affecting public expenditure decisions may be to fall into the trap of discussing the illusions of policy-makers who believe in their own freedom of action when in reality they are being driven by forces outside their control. Or, to take a weaker version of this approach, the discretion of the policy-makers may be limited to their ability to adjust to such forces - in which case the problem of studying trends in public expenditure becomes one of identifying the areas of discretion and defining the differential scope for adjustment. "9 GROWTH OF GOVERNMENT IN MANITOBA

Whatever the reasons for the growth of government expenditures, it is clear that this phenomenon has been evident in the province of Manitoba

3 6 The Government of Edward Schreyer

no less than in other parts of the industrialized world. When Manitoba became a province in 1870 it received $67,204 in annual subsidy payments from the federal government and raised just over $10,000 a year on its own, largely from fines, fees, and licences. Measured in terms of personnel employed, even after the province had been in operation for a decade, "a complete list of the civil service staff for 1880 was one deputy for each department plus one full or part-time clerk, a private secretary to the lieutenant-governor, an auditor, a printer, a caretaker, and three jailers. In 1881 the total number of civil servants was five, of whom four were deputies; the provincial secretary and the attorney general ran their departments single-handed with no clerical assistance and no deputies. Agriculture and Immigration was the only department to rate a clerk. " I0 By the time the Conservative government of Duff Roblin came into office in 1958, there were four thousand employees in the Manitoba civil service, and total provincial expenditures were less than $100 million. A decade later, the number of civil service employees had almost doubled, exceeding eight thousand by the time the Conservative government was defeated in 1969, and the provincial budget had almost quadrupled, reaching $394 million. Table i compares the current expenditures of the Manitoba government for 1958-9, when the Conservative government of Duff Roblin was first elected, with each fiscal year the NDP was in office. (That is, it excludes capital expenditures, which represented investments in physical assets by government departments and crown corporations.) It also compares this with the total of all goods and services produced in Manitoba - the estimated Gross Provincial Product — for the calendar years in which the respective fiscal years began. These comparisons show that, at the beginning of the Conservatives' term in office, the provincial government was spending 4.8 per cent of GPP. By the end of their term the Conservatives had more than doubled the provincial government's share of GPP, reaching 11.3 per cent in the year the NDP came into office. The government's share of GPP then increased to 15.0 per cent in 1975-6 and subsequently declined to 13.8 per cent in 1977-8. Table i also shows the number of full-time civil servants employed by the Manitoba government and government enterprises and compares the number of employees with the size of the provincial labour force. There was an increase in the share of the labour force employed as provincial civil servants, from 2.1 per cent just prior to the NDP taking office to 2.9 per cent during 1975. Among provincial crown corporations and other government enterprises, the number of their employees grew from 2.1 per cent of the labour force in 1968 to 2.8 per cent in 1975. This lends credence to the popular view that the size of the budget and the number of people employed increased substantially during the NDP

37 Taxes and Spending

TABLE 1 Growth of the Provincial Government, Manitoba, 1958-77

Year

Government Share of Share of Civil Current Total Labour Enterprises' Total Labour Expenditures Share of Service Employees Force (%) ($ million) GPP (%) Employees Force (%)

1958 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977

80.8 355.9 394.3 460.9 532.8 567.6 690.0 872.0 1,072.5 1,197.7 1,191.2

4.8 10.8 11.3 12.5 13.312.8 13.0 14.1 15.0 14.9 13.8

4,417 8,344 8,822 9,622 10,106 11,047 11,576 12,138 12,886 12,476 12,376

_ 2.1 2.4 2.5 2.6 2.7 2.8 2.8 2.9 2.8 2.7

— 8,026 7,977 7,844 8,303 8,592 9,614 10,797 12,184 12,048 11,968

_ 2.1 2.2 2.5 2.1 2.1 2.3 2.5 2.8 2.7 2.6

Source: Manitoba, Budget Address, various years; Manitoba, Public Accounts of the Province of Manitoba, 1977-8, 42; Statistics Canada, Historical Labour Force Statistics - Actual Data, Seasonal Factors, Seasonally Adjusted Data, 71-201; Manitoba, Annual Report, Civil Service Commission of Manitoba, various years. Note: Current Expenditure data are according to the fiscal year; i.e., from 1 April to 31 March of the following year; GPP is according to the calendar year; employee and labour force data are as of December of each year.

years in office. But the data also lend a note of scepticism to this perspective. Growth rates of government expenditures were no greater while the NDP was in office than they had been during the preceding administration. While the Conservatives more than doubled the provincial government's share of GPP, taking an additional 6.5 per cent between 1958 and 1969, the NDP increased the share by taking an extra 2.5 per cent of GPP between 1969 and 1977. Much of the growth of government expenditures in those years was a function of inflation and the maintenance of the government sector's share of a growing economy. A substantial increase did occur in the size of the civil service during all but the last year or two that the NDP was in office. The number of employees rose by more than four thousand between 1969 and 1975. But this increase was no greater in absolute terms and only half as great in relative terms as the increase in the size of the civil service between 1958 and 1969. In terms of its percentage of the labour force, it might also be asked what is the significance of an increase from 2.4 to 2.9 per cent in six years? To increase the provincial government's share by one-half of i per cent of the labour force is hardly dramatic, particularly when the growth took six years and was followed by a decline of o. 2 per cent within two years. A similar conclusion can be reached about the number of

3 8 The Government of Edward Schreyer

employees of crown corporations and other government enterprises. Major hydro-electric power projects and the creation of public automobile insurance helped bring an increase of approximately four thousand staff. In the years between 1969 and 1975, tms transferred 0.6 per cent of the labour force into provincial government enterprises. Within two years, the net transfer over the last year the Conservatives were in office had declined to less than one-half of i per cent of the labour force. A similar perspective on the size of the provincial government can be obtained by comparing Manitoba with other provinces. If provincial expenditures in each province are compared during the fiscal year the NDP came into office in Manitoba with their last complete year in office, higher rates of growth of provincial government expenditures, in percentage terms, can be seen in Alberta, British Columbia, Prince Edward Island, Quebec, and Newfoundland. The growth rate of government expenditures during the 1969-70 to 1976—7 period in Manitoba was less than the national average. For 1976—7, in per capita revenues generated by the provincial governments on their own, Manitoba was below the national average. Only the four Atlantic provinces raised less money, on a per capita basis, during the last full year the NDP was in office. When federal transfers and the like are included along with revenue, the total expenditure package for Manitoba still remains below average. Only Nova Scotia and Ontario spent less per capita during 1976-7 than Manitoba. A conflicting pattern does emerge when the growth of provincial government employment is quantified. The number of full-time wage and salary earners in the Manitoba provincial government increased by 54.4 per cent between 1969 and 1977. This was an above-average rate of growth, but was exceeded in percentage terms by Alberta, Saskatchewan, and New Brunswick. But to some extent, this growth rate, as expressed in percentage terms, was relatively great in the case of Manitoba because the numerical base in 1969 was relatively small. In 1969, no other province had such a small proportion of its population employed as full-time wage and salary earners by the provincial government. In that year there was one provincial employee for every 123.8 people in Manitoba, whereas nationally this figure was one employee for 100.5 people. By 1977, both Quebec and Ontario had smaller proportions of their populations thus employed than did Manitoba, although Manitoba was still below the average. Compared to 1969, the provincial government as an employer in Manitoba had grown at a rate more than twice the national average for provincial governments. But Manitoba's public service was still among the smallest in the country, as measured by its share of the labour force or total population.

39 Taxes and Spending

The total picture which emerges of Manitoba under the NDP is therefore somewhat contradictory. Expenditures did grow, but they remained among the smallest per capita in the country and did not expand any more rapidly than they had under the Conservative government. The size of the civil service grew more quickly than in other provinces, but remained less than the national average even after two terms of NDP government. The rate of expansion of the public service had been greater under the preceding Conservative administration. Government expenditures and the size of the public service did grow quite substantially during the NDP terms, but a large part of this growth merely brought government activity into line with that of other provinces. Most financial indicators suggest that even after eight years of NDP rule, the level of government activity was still less than that found in other provinces in the middle of the 19705. GOVERNMENT REVENUES

It is evident that the Manitoba government's total level of activity did not vary significantly from that occurring elsewhere. The question arises whether the basis upon which expenditures were financed was altered during the NDP regime. Did the government shift, as it claimed to do, the burden of taxation from those least able to pay onto those with the greatest disposable financial resources? The gross revenue base of the Manitoba government can be compared with that found in provincial governments in Canada as a whole. Picking two separate points of time (the 1968-9 fiscal year, the last complete year the Conservatives were in office, and the 1976-7 fiscal year, the last complete year the NDP was in office) it becomes evident that, although the total revenues obtained by the Manitoba government more than tripled during this period, the relative importance of the various revenue sources remained more or less constant. When the NDP first came into office the most important sources of provincial revenue were transfer payments from the federal government, personal income taxes, and the general sales tax. No other revenue source generated more than 10 per cent of total gross provincial revenues, although the tax on gasoline, corporate income taxes, and profits from the sale of alcohol each generated between $ and 10 per cent of total revenues. The three major sources of revenue raised a total of 56.8 per cent of all provincial revenues. Adding the fourth, fifth, and sixth greatest sources of gross revenue increased this to 76.6 per cent of all Manitoba's provincial revenues in 1968-9. By the time the NDP had been in office for eight years, there was little alteration. The three major sources of provincial revenue — transfer payments, personal income, and sales taxes - continued to be the major money-raisers. In fact, the share of

4O The Government of Edward Schreyer

total revenue contributed by these three sources increased to 64.4 per cent. On the other hand, gasoline taxes and liquor profits declined in relative importance. Examining the data from a different perspective, each source of revenue can be compared both across time and across provinces. Comparing revenues in 1968-9 with those in 1976-7 both in Manitoba and in all ten provinces together yields a slightly different set of results. For example, transfer payments from the federal government grew in importance as a source of revenue more for Manitoba than for other provincial governments, and this was also true of personal income taxes and interest payments. By contrast, revenues from natural resources forests, mines, oil, and gas - increased in importance to a greater degree elsewhere than in Manitoba. On the negative side, the most highly publicized revenue decline in Manitoba resulted from the elimination of medicare premiums. This tax had never been among the largest sources of revenue, generating only 3.0 per cent of gross revenue in 1968—9. Because of its unpopularity, it was abolished during the NDP government's first term. This decline could also be seen as part of a national trend, medicare premiums having become a less significant source of revenue in all provinces. Between 1968-9 and 1976-7, general sales taxes, tobacco taxes, and liquor taxes and profits all became less important across the country. But the declines, as shares of gross revenue, were greater in Manitoba. Taxes collected from the operation of motor vehicles declined to a lesser degree in Manitoba than elsewhere. A useful set of comparisons can be obtained from the work of Douglas McCready and Conrad Winn, who examined the taxation policies of the governments of the four western provinces. Income taxes became more important in all four provinces. "In the case of Saskatchewan, the province's dependence on income tax actually increased more under Liberal governments than under the CCF-NDP simply because the Liberal party was in power in the more recent period between 1964 and 1971." Whether a province was ruled by a CCF-NDP, Conservative, or Social Credit government did not seem to make much difference as to its degree of reliance on revenue from income taxes. A similar conclusion was drawn from the authors' examination of each of the four western provinces' dependence on the sales tax: "Social Credit governments occupied the extremes, British Columbia being the most dependent on revenue from sales tax and Alberta having no sales tax at all. The case of Saskatchewan does not seem to show partisan pattern."11 One relevant aspect of these relative increases and decreases of tax revenues is the degree to which all provincial governments, and Manitoba in particular, have shifted their dependence on particular types of

4i

Taxes and Spending

revenue. Two types of tax can be identified - regressive and progressive and the contrast between them is quite startling when the revenues generated are compared. During the 19705, both in Manitoba and in the country as a whole, the proportion of total provincial revenues received from most of the progressive taxes increased while the proportion received from each of the regressive taxes decreased. While this was true of all provinces, the rate of change was greater in Manitoba than in the rest of the country. While the NDP was in office, the Manitoba government was particularly adept at shifting part of the burden of taxation away from regressive and onto progressive taxes. On the progressive side, by the end of its second term in office, the NDP had set a personal income tax rate among the highest in the country. By 1977, Quebec, with its dramatically different fiscal arrangements, Saskatchewan, and Newfoundland had higher rates of income tax than Manitoba. The six other provinces had lower rates. The corporate income tax in Manitoba also was among the highest in the country. Only Newfoundland, Saskatchewan, and British Columbia were even within the same range. On the regressive side, Manitoba tax rates were among the lowest in the country. The retail sales tax rate in Manitoba was the same as that in Saskatchewan but lower than that found in the seven provinces outside the prairies. The gasoline tax was lower in Alberta and British Columbia but higher than in Manitoba in seven other provinces. The cigarette tax was lower in Alberta, New Brunswick, and British Columbia, the same as in Manitoba in three other provinces, and higher in two other provinces. So the Schreyer government of Manitoba took a trend already under way in the country as a whole and accelerated its impact. Personal income taxes and revenue from natural resources contributed larger shares of provincial government revenues. General sales, motive fuel, tobacco, liquor, and motor vehicle taxes all generated smaller proportions of provincial government revenues, and medical insurance premiums ceased to generate any revenue at all. The one exception was the corporate income tax, which increased in significance in Manitoba but declined in importance as a contributor to revenues in other provinces. At the same time, the NDP government was implementing new forms of taxation which, at least in the first instance, fell most heavily on the corporate sector of the economy. The metallic minerals tax, the mineral acreage tax, the corporation capital tax, and the pari-mutuel tax all were created between 1969 and 1977. But all of these taxes combined were able to contribute only 3 per cent of all revenue, even during 1977-8 when they were of most importance. They balanced out, almost exactly, the loss of revenue sustained through the abolition of medical care premiums. In summary then, the government of Edward Schreyer did shift some

42 The Government of Edward Schreyer

of the burden of taxation onto those individuals and corporate interests best able to pay. There appears to be no doubt as to the egalitarian direction of the change in the tax structure. But the real question was how far the government was willing to proceed in this direction. The alteration of the tax structure appears to have been marginal at best. GOVERNMENT SPENDING

The election of a social democratic party to office might be expected to transfer, in a significant way, the major portion of government expenditures from some areas into others. In addition to a major increase in expenditures as a whole, there might be a shift of those expenditures away from services to upper-income individuals and corporate interests and toward working-class individuals. Also, it might be expected that there would be a greater role for government in economic enterprise. For example, more money might be spent on health, social welfare, technical education, and on the establishment of new and the expropriation of existing industries. There might be less money spent on financial grants and assistance to corporations, to the fine arts, and to universities, more on public transportation and less on highway construction. But before the degree of altered priorities in government expenditures can be assessed properly, certain standards of comparison need to be explicated. The first distinction which needs to be drawn in how government expenditures are categorized is that between transfer payments - the giving of money to groups or individuals for them to spend - and expenditure on goods and services. The latter type of expenditure has been labelled "exhaustive." The former, nonexhaustive type involves no consumption of goods or services, except the relatively slight share of costs involved in administration. Some of the Schreyer government's most expensive new programs involved the transfer of financial resources to individuals and to local governments, school divisions, universities, hospitals, and so on. Property and cost-of-living tax credit programs, the transfer of part of personal and corporate income tax revenue to municipal governments, and the pharmacare program which transferred funds to individuals to cover the cost of medical drugs, were examples of nonexhaustive expenditures. On the other hand, those financial transfers had to be matched by roughly equal revenue sources which were the responsibility of the provincial government. The second distinction involved in the categorization of government expenditures is between the various functional areas of public endeavour. Health, social welfare, education, natural resources, transportation and communication, and protection of persons and property are examples of the more commonly used categories of function. In Canada as a whole, it

43 Taxes and Spending has long been obvious that these functional areas have been expanding at widely differing rates. Two of the greatest users of public resources have been health care and education and both have been growing rapidly. Three functional areas - health, education, and social welfare - took up major shares of total expenditures by government. Yet if the health and social welfare categories of public expenditure are combined for analytical purposes, Canada did not spend a particularly large amount of money relative to other industrial nations. For example, Harold Wilensky's comparison of countries' social security spending, as a percentage of their gross national product, showed virtually every well-off country in western and central Europe to be spending more than Canada. The only exception, of the sixteen European countries examined, was Switzerland.12 Given an understanding of the importance of these three functional areas in Canada as a whole, it then becomes possible to start making interprovincial and interparty comparisons of expenditure levels. The work of William M. Chandler, for example, points in the direction of greater expenditures by CCF and NDP governments in the areas of health and social welfare.13 He examined expenditure patterns in Ontario and the four western provinces over a quarter of a century and his results suggest, as one might expect, that CCF-NDP governments spent more on health and social welfare than did governments controlled by other parties. However, much of this distinction was a result of events in the province of Saskatchewan during and soon after 1944. Until 1944 health spending was utilizing only i. 4 per cent of the Saskatchewan provincial budget. Within four years, after the introduction of a governmentfunded hospitalization plan, health care expenditures had reached 13.1 per cent of the budget, and in the next decade the Saskatchewan government's spending on health went as high as 36.4 per cent of the total. But in the long run there was nothing unique in this development. The CCF'S pioneering efforts placed it a few years ahead of the other provinces, but British Columbia, Alberta, and Newfoundland had some form of hospitalization soon after Saskatchewan. By the 19705, the NDP government in Saskatchewan was spending relatively less money on health care than was being spent in other provinces. The research work of William. M. Chandler and Marsha A. Chandler included policy and expenditure areas in addition to health care.14 However, none of the major variations between provinces seemed to be even remotely related to which party was in office or to the ideology of that governing party. Various other studies of provincial policy outputs have confirmed this lack of partisan variation. Perhaps the ultimate expression of the lack of party or ideological impact is found in a paper by Douglas McCready and Conrad Winn. There it is argued that policy in general and, in particular,

44 The Government of Edward Schreyer

"the redistributive behaviour of all the parties does not differ significantly. " IJ They reviewed several studies of provincial policy output, all of which tended to support the general argument. David Campbell's study of levels of government expenditure in various functional areas in Saskatchewan before and after the CCF was replaced in office by the supposedly much more conservative Liberals found no statistically significant differences in expenditure. Dale Poel's examination of several types of government output, as measured by net provincial expenditures, failed to discern any marked variations which could be linked to which party was in office. Poel concluded "that all types of expenditures varied together and that total expenditures were influenced primarily by the economic development of the province. 'l6 Per capita income did far more to explain levels of expenditure than did the partisan affiliation of the government. An examination of gross expenditures in Manitoba while the NDP was in office supports some of the findings elsewhere. The use of Statistics Canada data collected according to broad categories of provincial government expenditure, from 1968-9, the last complete fiscal year before the NDP came to power, and from 1976-7, the complete fiscal year before the party left office, permits interprovincial comparisons, both during any one year and across time. These data suggest certain major trends of expenditure, which seem just as apparent in Manitoba as in Canada as a whole. Expenditures on general government structures and administration, health care, and social welfare all increased as shares of most provincial budgets, including that of Manitoba. Expenditures on transportation and education decreased as shares of most provincial budgets, again including that of Manitoba. The greatest variation between Manitoba and the other provinces was not in the direction of change but in the lengths to which governments were willing to go in altering their expenditure patterns. Manitoba transferred a larger proportion of its expenditures into general government, the protection of persons and property, and health and social welfare than did other provinces. It was willing to commit even fewer of its expenditures to transportation and education than other provinces. But these are only differences of degree which might have been similar if a Liberal, Conservative, or Social Credit government had been in office. Indeed, some of these differences were a function of the categories Statistics Canada used and the way the agency decided to treat certain types of expenditures. A more detailed and extensive set of data was collected which included the current expenditure for each department or other major cost centre for each fiscal year in which the Schreyer government was in office, plus the last fiscal year before it was elected. The most notable feature of these

TABLE 2 Gross General Expenditure, 1968-9 and 1976-7 1968-9 Manitoba Function

($ millions)

Shares of Expenditure % Change 1968-9, to 1976-7

1976-7 All Provinces

All Provinces

Manitoba

%

($ millions)

%

($ millions)

%

(I millions)

%

Manitoba

All Provinces

General govt.

14.8

3.4

449.7

4.2

96.5

6.0

2,288.3

5.9

+2.6

+ 1.7

Protection

13.5

3.1

391.9

3.7

66.8

4.1

1,449.2

3.7

+ 1.0

-

Transportation

51.9

12.0

1,304.8

12.3

86.3

5.3

2,982.3

7.7

-6.7

-4.6

Health

99.3

22.9

2,557.8

24.0

431.1

26.7

9,739.1

25.0

+ 3.8

+ 1.0

42.4

9.8

1,251.7

11.8

260.9

16.1

5,581.0

14.3

+6.3

+2.5

133.2

30.7

2,997.2

28.2

311.1

19.2

9,119.0

22.8

-11.5

-5.5

Natural resources, agriculture, & industry

37.8

8.7

517.5

4.9

102.9

6.4

2,035.3

5.2

-2.3

+0.3

Other

40.2

9.4

1,175.2

11.0

260.8

16.1

5,779.8

14.8

+6.7

+ 3.8

Total

433.1

100.0

10,645.8

100.0

1,616.4

100.0

38,974.0

100.0

Social welfare Education

Source: Statistics Canada.

46 The Government of Edward Schreyer

data was the relative constancy of the relationship between the various departments, as measured by their levels of expenditure. Although the total Manitoba budget almost tripled in dollar terms while the NDP was in office, most departments were spending approximately the same amount, as expressed as a share of the total budget, at the end of the period as they were at the beginning. The departments of Legislation, Executive Council, the Attorney-General, Civil Service, Consumer, Corporate and Internal Services, Finance, Industry and Commerce, Labour, Municipal Affairs, Mines, Resources and Environmental Management, Public Works, and Tourism, Recreation and Cultural Affairs, as they were structured in 1977, did not receive as much as i per cent more or less of the province's total current expenditures than they had received in 1969. These departments represented the most stable elements in the government's spending pattern throughout the decade under examination. Several other departments and agencies barely in existence as parts of other departments in 1969 - for example, Co-operative Development and Urban Affairs — each consumed less than i per cent of the government's total expenditures. The major areas of growth, as measured by percentage of the total budget, were in the departments of Health and Social Development, Northern Affairs, and Agriculture; in the Manitoba Housing and Renewal Corporation; and in transfer payments like the property tax credits and cost-of-living tax credit plans. This last area of expenditure, which was similar to programs found in other provinces, was approaching one-tenth of the total budget by the time the NDP was defeated. The major areas of decline in relative, although certainly not absolute, expenditures were in the departments of Education, Continuing Education and Manpower, and Highways. The total shift away from these three departments between 1968—9 and 1977—8 was almost one-fifth of the current budget. One could say that, in effect, approximately one dollar in every five of current expenditures was taken out of education and highways and transferred to other spending priorities. However, highways and education expenditures reached a peak, as spending priorities, during the 19505 and 19605 throughout North America. Spending patterns in Manitoba reflected these much broader trends and, when their relative importance decreased during the 19705, Manitoba followed these patterns. Most of these transferred shares went into the tax credit plans or the Department of Health and Social Development. Lesser portions were transferred into Northern Affairs, Agriculture, and the Manitoba Housing and Renewal Corporation. Despite the various department, agency, or program titles, all of these major recipients of transferred resources could be classified as health or social welfare expenditures. The

47 Taxes and Spending

Department of Health and Social Development included programs in both these functional areas. Expenditures by the Department of Northern Affairs included major efforts in manpower training and employment, and in the provision of services and facilities which northern residents could not otherwise afford. Expenditures by the Manitoba Housing and Renewal Corporation largely involved subsidies to the lowest income sector of society. Expenditures on property tax credits had the effect of keeping down the level of property taxes, one of the more regressive forms of taxation.17 RELATIONS WITH FEDERAL GOVERNMENT

The final problem to be discussed in this chapter has relevance to all aspects of the NDP as a party and a government but can be most closely examined in reference to fiscal matters. This is the problem of a social democratic party in office (particularly in a small province like Manitoba) surrounded by other economic and political institutions controlled by people with a very different set of values. It involves a long-standing question of strategy recognized at least since the early days of the CCF. Whether a social democratic party should place any emphasis on gaining political office at the provincial level has been subject to debate. On the more general level there is the problem of one democratic socialist government, in control of a province, attempting to function within the North American continent where virtually every other social, economic, and political institution supports the continuation of a capitalist society. T.C. Douglas's reference to Saskatchewan under the CCF as "a beachhead of socialism on a continent of capitalism" expresses the problem graphically. Of course, similar problems are experienced by provincial governments of all political shades. For example, in any attempt to deal with the broad issues of unemployment and inflation, any provincial government would be hamstrung in its ability to act in a concerted fashion. In addition, the ability of the provinces to undertake deficit financing, in terms of high unemployment, is limited. This would be a problem at the national level, even though the government there has some control over monetary policy; at the provincial level, all revenue must be raised through taxation, transfer payments from the federal government, or borrowing. In this respect, the financial position of a provincial government is similar to that of a public utility or of a privately owned corporation. All must borrow money to operate on a day-to-day basis; all must borrow money if and when expenditures exceed revenue; and all face the possibility, however remote, of going bankrupt. "Even the larger

48 The Government of Edward Schreyer

provinces with their high borrowing capabilities on the public market are only in the position of preferred debtors and lack that basic power that goes with national status in these fields, i.e. the access to the central banking system which is so important to extend deficit financing in terms of continuing stress. Even if the credit resources were adequate, the costs of carrying the debt could be a real budgetary burden."18 For a provincial government, like a municipal government, the ability to borrow money is crucial to the continuation of its operations. In Manitoba, between 1969 and 1977, at no time was there any indication that the government was having any particular difficulty in selling its bonds or debentures. Premier Schreyer was particularly vocal, especially during his last year or two in office, about Manitoba's high credit rating. This was just as well; between 1972 and 1977, the Manitoba government raised $536.9 million through the sale of debentures, and an additional $33.9 million was raised through the more public, small investororiented sale of savings bonds. Much of the money raised was on behalf of Manitoba Hydro and its large-scale Nelson River hydro-electric construction projects. But whatever use the money was to be put to, there was a continual and, during the government's second term, dramatically increasing necessity to raise funds from the bankers and investment houses of New York, Zurich, or Tokyo. This activity became of such importance that a division of the Department of Finance, the Treasury Division, headed by an assistant deputy minister, was established to coordinate the province's borrowing activities.I9 In addition, $4 million had to be raised every week in the form of Manitoba Government Treasury bills and notes. At any one time, the government of Manitoba had $52 million of debt in this form but, because they had a duration of only ninety-one days, over the space of a year the Manitoba government raised $208 million through Treasury bills sold to private investment interests. This aspect of government financing, in particular the interest rate which must be paid, gave provincial officials a weekly indication of their credit rating. In effect, it provided a weekly poll of government popularity, but with the sample drawn exclusively from large-scale financial investors. It was also a firm and constant reminder of the provincial government's degree of dependence on major financial interests and what the effect of that relationship was likely to be. As long as Manitoba needed to borrow large amounts of money, and those amounts were doubling every year, how could anyone expect the government to move in any radically new policy directions? But the lack of independence of a provincial government is obvious in othe ways. In generating revenue, a provincial government is tightly controlled as to the type of taxes it can levy and its sources of funds. The form taken by these taxes is also restricted. With only a limited degree of

49 Taxes and Spending

negotiation with the federal government and the other provinces possible, a provincial government finds it difficult to strike out on its own to raise taxes. For example, it would be very difficult, although certainly not impossible, for a small province like Manitoba, given the existing taxation framework, to establish its own system of personal or corporate taxes parallel to the federal versions of these same types of taxation. The administrative costs alone would be onerous. Any major alterations of taxation procedures or rates (for example, to make the taxes much more progressive) would be almost impossible as long as Manitoba continued to remain within the federal taxation framework. Yet it is difficult to overestimate the magnitude of the revenues whose collection is largely under the control of the federal government. By 1976—7 Manitoba was receiving 34.0 per cent of its net revenue in the form of transfer payments from the federal government, 18.7 per cent from personal income taxes, and 7.2 per cent from corporate income taxes administered by the federal government. The federal government, therefore, was exercising some degree of control over approximately 60 per cent of Manitoba's revenues. By the time the Schreyer government was able to present its last provincial budget, Manitoba had become if anything even more dependent on the federal government for the province's revenue base. For example, in 1977-8, individual income taxes were estimated to be worth $191 million in net revenue to the provincial government. An additional amount was to be raised in individual income taxes and then transferred elsewhere - $13.6 million to municipal governments and $ i z i. 8 million to various tax credit schemes. Corporate income taxes would generate an estimated $96.3 million of net revenue for the provincial government and $7.8 million for municipal governments. The Established Programs Transfer from the federal government was expected to provide $45.9 million of net revenue to the province and $199.6 million to the Manitoba Health Services Commission. Transfers from the federal government or federally administered taxes represented over one billion dollars of gross revenue. This was of far greater significance than the $505.7 million raised by the province on its own, and the transfers took place, one might add, at a time when the Manitoba government was complaining bitterly about reductions in the level of federal financial support. The one billion dollars of gross revenue from federal transfer payments and federally administered taxation schemes represented 66.4 per cent of total estimated provincial gross revenue for 1977-8. Barely one-third of gross revenue came from sources other than those controlled by the federal government. Of the money to be received from the federal government during 1977-8, better than one dollar in every five or six was coming in the form of conditional grants, over half of which were for hospital and medical

50 The Government of Edward Schreyer

care insurance. The next largest amounts were for social welfare recipients, part of the costs of vocational training, and the CanadaManitoba Northlands Agreement with the Department of Regional Economic Expansion. These conditional grant programs were open to cancellation or reduced emphasis by the federal government. For example, in 1977, by a new Federal Provincial Fiscal Arrangements and Established Programs Financing Act, "federal cost-sharing for provincial hospital insurance, medicare and post-secondary education programs was replaced by a transfer of per capita cash payments and greater income tax responsibility to the province." But, the Manitoba government complained, the replacement was not of equal value: "unlike the former cost-sharing system, federal contributions will no longer bear any direct relationship to program costs, and the federal government will no longer share in any of the risks associated with possible increasing cost pressures in health and post-secondary education programming. "20 In addition, the major conditional grant programs would require an equal or greater level of provincial financial input and would require the provincial government to meet certain hidden costs - heavy costs in time and energy negotiating cost-sharing agreements, time and energy which might be used more profitably on programs with a higher political priority. These costs were likely to be felt more severely at the provincial level by a social democratic government, and the more radical and determined that government was to carry out social democratic policies, the higher were these hidden costs. Unless a social democratic party also happens to be in power federally, it might be expected that the federal government would develop fewer shared-cost programs suitable for social democratic priorities than programs related to the priorities of other provincial governments. At the same time, the government of Manitoba was expected to be the delivery mechanism of the government of Canada; policies and programs set down in Ottawa were administered by Winnipeg. From this perspective, Canada has gone much further than is usually thought along the road toward what has been termed the "central European model" of federalism. The West German case is the most typical of this model, "in which the establishment of basic priorities is highly centralized but in which administration is decentralized; in effect, the states are administrative units which carry out centrally determined objectives."21 This process is especially open to conflict where new programs are being implemented or where a major change of the ground rules is taking place, developments in which there may be an opportunity for any of the participants to play a significant role in the policy sense or major questions of values and of allocations of resources may be involved. Much of this has been thoroughly documented for governments of all

51 Taxes and Spending

political stripes across the country. In the case of adult occupational training, J. Stefan Dupre and others have shown the degree to which federal proposals were developed without consultation with the provinces.22 Bruce Doern has documented, within this same policy field, "a rapid shift in priority spending in the provinces toward technical and vocational education," a shift which "tended to throw the provincial education systems out of balance."23 Rand Dyck has discussed what appears to have been an exception to the rule, the Canada Assistance Plan. It was an exception, it seems, only because of disagreements within the senior levels of the federal bureaucracy. In response to provincial demands for greater flexibility, "Federal welfare officials were not particularly forthcoming ... Instead, it was officials of the Department of Finance, the Treasury Board, and the Privy Council Office who were most concerned about this problem ... The prevailing philosophy of the Finance Department was that such measures should be as flexible as possible and contain as few conditions as necessary — only enough to satisfy Parliament and to maintain an element of federal financial control."24 But, for whatever reasons, this was an exception. More normal was the process through which medicare was implemented during the late 19605: "In that case, provincial objections were simply ignored, for the most part, until the financial incentives involved forced the provinces into submission." It is in these new and important areas with high financial stakes that the social democratic provincial approach might be expected to differ most significantly from that taken by the nonsocialist federal government. If the bases of conflict are greatest within these areas for all parties no matter who is in office, then one might expect a democratic socialist provincial government to be even more often in conflict with the federal government than would be the case if both levels of government were under the control of the same party or ideology. That Manitoba was not seen as a particularly virulent opponent of the federal government between 1969 and 1977 provides some indication of how little significance party ideology had, in regard to either the daily administrative details or the major questions of federal-provincial relations. Indeed, provincial political culture appears to be a far better indicator of the strength of federal-provincial conflicts than is the ideology of the parties in office at either level. Studies of political attitudes among voters in Manitoba have shown them to be among the most favourably disposed toward the federal government of any voters in the country. This is particularly evident by comparison with attitudes among voters in the nearby prairie province of Alberta. Roger Gibbins has noted "the relative propensity of Manitoba voters to support the national government; the contrast between Manitoba and Alberta is very sharp. The east-west

52

The Government of Edward Schreyer

gradient, in which Manitoba most closely approximates the national norm and Alberta departs from it most significantly, crops up repeatedly in the analysis of prairie politics. It derives in part, we suspect, from Manitoba's relatively prolonged immersion in the Canadian political system prior to the eruption of agrarian radicalism in the 2Oth century. Perhaps of even greater importance is the effect of Ontario immigration into Manitoba. " 25 And David J. Elkins has put together data which show that, compared with their fellow Canadians in other provinces, Manitobans have a very high degree of identification with Canada as a whole. They share this characteristic with English-speaking Quebeckers, people who live in PEI and New Brunswick, and to a lesser extent francophones resident outside of Quebec. These attitudes are in sharp contrast to those held by people living in Newfoundland and Alberta and French-speaking Quebeckers, all of whom have a low sense of identity with the country as a whole.26 In summary, a social democratic party elected to office at the provincial level is much more circumscribed in its behaviour than one elected as a national government. Its control over its own economy, its own supply of money and credit, its ability to tax, its independence from the senior level of government, and its ability to finance new programs are all severely restricted. This is not to say that a social democratic party elected at the national level is free to do as it chooses. Rather, election to office at the provincial level merely accentuates the difficulties already inherent in attempting to change a liberal, democratic, industrialized, and economically developed political system. On the other hand, to accept the previously discussed restrictions on the NDP government's willingness or ability to act is not to deny that the government was able to accomplish anything at all. The Schreyer government was not totally circumscribed by the restrictive setting in which it found itself. The party was elected with a limited mandate to implement a certain platform and it did succeed in carrying out some of the proposed measures. But to assess what was accomplished by the NDP in Manitoba also requires that we determine how far the party went toward attaining the objectives of social democracy. Beyond the short-term platform outlined during the election campaign, was the NDP in Manitoba able to move any considerable distance toward the implementation of a democratic socialist program? In the first chapter, four criteria of socialist ideology were put forward against which to measure a political system nominally under the control of a democratic socialist government. These criteria, the redistribution of wealth and income, the extension of government control and ownership of the economy, government planning of the economy, and greater public participation in the decision-making processes of major institu-

53

Taxes and Spending

tions, were explicit enough to be used to measure and evaluate the activity of any social democratic government. That they were applicable to the situation in Manitoba has been demonstrated in earlier chapters. It is now possible to examine, in the light of each of these four criteria, the record of the Schreyer government between 1969 and 1977.

CHAPTER FIVE

The Schreyer Government's Policies

REDISTRIBUTION OF WEALTH AND INCOME

Premier Edward Schreyer was fond of quoting United States President Franklin D. Roosevelt to the effect that "the test of our progress as a society is not in whether we add to the abundance of those who already have much, but in whether we provide more for those who have little."1 In 1976, speaking at an NDP riding association meeting, Premier Schreyer put forward as one of the objectives of his government the ability "to reduce differentiation, to bring about greater equality, to reward the dignity of work. And I do not believe for a moment that the dignity of work is rewarded when somebody who works in the packing house or steel mill or smelter, full-time, honest effort, who works in a sense that his shirt sticks to his back, receives one-fifth or one-sixth of somebody in an executive or professional position. That is anathema, I suggest, to a true Social Democrat. "2 In the same speech, Schreyer introduced a very specific goal for greater equality in the human condition. He pointed to Sweden, Israel, and West Germany as countries where wage differentials had been reduced and then he specified the proper degree of differentiation: "the ratio in Sweden and Israel of 'take-home' pay between a general and a private and therefore by a captain of industry and a floor worker in the plant is in the order of 2.5 to i and not more than that. I would suggest that that is a realistic goal to strive for."3 Through these words, Schreyer pointed to an area of major importance to an understanding and evaluation of the NDP government of Manitoba. In fact, they point to an area important to any social democratic government, its attempts to reduce disparities of wealth and income. Were such reductions of great enough magnitude to be considered significant? Were they greater than those achieved by Liberal,

5 5 The Government's Policies

Conservative, or Social Credit governments? There is no question that some attempts were made by the NDP government to reduce economic disparities. However, the degree to which the government's actions reduced such disparities must be considered. Taxation No other activity of government has such a direct bearing on the levels of income and wealth of the average citizen as the taxation system. During the NDP government's first year in office, medicare premiums were cut by 88 per cent, and in 1970 the government increased personal income taxes by six percentage points to equal 39 per cent of the federal basic income tax and increased corporate income taxes by two percentage points to 13 per cent of the federal basic tax. This was the most dramatic measure to redistribute incomes in Manitoba during the entire period of the Schreyer government. But by the end of that period, both the NDP government of Saskatchewan and the Conservative government of Newfoundland had enacted higher personal income tax rates. Quebec's provincial rates were much higher than the rates in any of these provinces but its whole taxation arrangement with the federal government was of a very different sort. The Liberal government in Nova Scotia and the Conservative government in New Brunswick charged rates nearly as great as in Manitoba and several other provinces levied a corporate income tax on a par with that found in Manitoba. Increased personal and corporate income taxes were followed, in 1972, by the introduction of tax credit schemes similar to those in effect in other provinces, including Ontario. These schemes grew to a $105.9 million expenditure in 1976—7, almost nine per cent of the current budget. But these expenditures do not entirely represent transfers of income or wealth from the rich to the poor. Most of the money involved was paid out to all income classes. When first introduced, minimum benefits were fixed at $50 and maximum benefits at $140. In 1973, minimum benefits were raised to $100 a household and maximum benefits to $200. This meant that every head of a household, no matter what his or her level of income or amount of wealth, received at least $100. The amounts were raised every year until finally, in 1977, a few months before the provincial general election, minimum benefits were raised to $225 and maximum benefits to $375. Table 3 illustrates the redistributive impact of property tax credits for one particular year. In 1974, 80 per cent of total tax returns claiming the tax credit were from people earning less than $12 thousand. For people in this income group, most received between $27 and $37 over and above the minimum. The most favoured income class consisted of those who

56 The Government of Edward Schreyer

TABLE 3 Personal Income and Property Tax Credit Claiming Filers in Manitoba, 1974 Income Class

Percentage of Total Returns

Average Property Tax Credit

Tax Credit Received Above Minimum

-$2,000 $2,-$5,000 $5,-$7,999 $8,-$l 1,999 $12,-$19,999 $20,000+

12.7 20.7 21.2 25.5 16.9 3.1

$177 181 187 178 156 149

$27 31 37 28 6 -

Average (all classes)

$8,148

176

26

N = 313,076 Source: Manitoba, Debates and Proceedings, 13 April 1976, 2445.

earned $5,000 or more but less than $8,000. Not shown in this table would be at least another 100,000 men and women who were members of the labour force but who could not claim a property tax credit because someone else in the family already had filed such a claim. These second or third members of the family, who were in the labour force, would have had lower incomes, on average, than those who collected the property tax credit. In other words, three-fifths of the labour force received, on average, between $30 and $3 5 above the basic amount. Another sixth or seventh of the labour force, the most prosperous portion, received little or nothing above the basic amount. The remaining quarter of the labour force, less prosperous on average than the majority, received not even the basic amount. It would appear that the property tax credit scheme was barely redistributive, if at all. It may even have been regressive, taxing the lowest paid sector of the work-force, many of whom could not claim the tax credit, and transferring that revenue to those with average or above average incomes. In 1974, the Schreyer government announced a cost-of-living tax credit scheme aimed at helping those people in the lowest income ranges. Even the minister of finance, Saul Cherniack, admitted in his budget address that it was modelled on a program "introduced by the Ontario Government... when it implemented its sales tax credit program. "4 The Conservative government of Ontario's scheme was adopted with increased benefits, but the amount of money put into the cost-of-living tax credit scheme was only a fraction of that allocated to the property tax credit scheme.

57 The Government's Policies

In another field related to the redistribution of economic resources was the NDP government's policy of creating short-term jobs for the unemployed. A whole host of programs existed to create jobs for only a few weeks or months — such as the Provincial Employment Program and the Work Activity Projects — or to create jobs for a longer period of time, such as the New Careers program which brought disadvantaged people into the public service. The programs also benefited the government by reducing welfare costs and furthering the macroeconomic goal of increasing activity through major stimulation of the economy. For most recipients, the benefits were strictly short-term - much like a form of unemployment insurance - and were not a great deal higher than what might have been received through unemployment insurance or welfare. One exception was the government's Guaranteed Annual Income experiment. It provided greater benefits to those on welfare and supplemented the incomes of the working poor. But the GAI program was a social experiment, a short-term program lasting only a few years with a prescribed point of termination, and was restricted to a small percentage of the province's possible recipients. Most of Manitoba's poor were not included in the experimental group. Minimum Wage Laws Employees receiving only the legal minimum wage in Manitoba represented about one-tenth or one-twelfth of the total work force. For those people, wages were legislated by the provincial government and a legislated increase in their standard of living would have been a possible move in the direction of redistribution of incomes. In fact, minority reports of the province's Minimum Wage Board recommended that the minimum wage be set at 60 per cent of the average weekly earnings of the industrial composite index. But, as the data presented in Table 4 demonstrate, while the NDP held office the minimum wage varied as a percentage of the average weekly earnings of the industrial composite index within the 50 to 5 5 per cent range. Although the actual amount rose almost annually, the increases approved by the cabinet were barely enough to keep up with inflation and, over the eight-year period, proceeded at approximately the same rate of increase as the average earnings of the rest of the work-force. During its last year in office, from September 1976 until its defeat in October 1977, the government chose to maintain the minimum wage unchanged at $2.95 an hour. Given the constant erosion of the dollar's purchasing power due to inflation, the minimum wage had declined to approximately 52 per cent of the industrial composite average by the time of the 1977 general election - just slightly above what it had been at the

5 8 The Government of Edward Schreyer

TABLE 4 Manitoba Minimum Wage as a Percentage of Average Weekly Earnings Date

Minimum Wage I Hour

% Average Earnings

December 1968* December 1969 October 1970 November 1971 October 1972 October 1973 July 1974 January 1975 October 1975 September 1976 December 1977** March 1978*

$1.25 1.35 1.50 1.65 1.75 1.90 2.15 2.30 2.60 2.95 2.95 2.95

49.6 51.0 50.9 51.0 50.6 51.0 51.7 52.8 53.4 54.9 51.4 50.3

Source: Manitoba, Debates and Proceedings, 14 June 1978, 3741. ^Denotes Conservative provincial government in office. **Change of government occurred about two months earlier.

beginning of the NDP regime. All of which suggests that there was very little change in the lives of Manitoba's low-income citizens as a result of the province's minimum wage laws - despite the legal power of the government to change their standard of living. The Schreyer government undertook to provide types of services to people in the northern part of the province which people in the south took for granted. Largely through the vehicle of the new Department of Northern Affairs, the government extended the range of public goods in the north - particularly through the provision of basic services and manpower training - to a degree which it would not or could not match in the south. It provided school milk programs, recreation, housing, and service centres in some northern communities. It participated in the direct ownership of businesses at the local level, helped to establish and operate cooperatives, and assisted small community development through crown corporations and partnerships with local entrepreneurs.5 All of these programs consisted of welfare measures, providing financial benefits and services to people who otherwise could not afford them. In the field of education, while total expenditures claimed a smaller share of government outlays, the placement of funds was altered to some extent. Student aid and assistance, for example, grew from approximately $901,000 in 1968-9 (0.25 per cent of the province's current budget) to $3.7 million in 1976-7 (0.31 per cent of current expenditures). Other human resource development programs in education grew from virtually

59 The Government's Policies

nothing when the government was first elected to $i i .4 million in 1976-7 (0.95 per cent of current expenditures). The latter included programs which provided summer employment for students and brought native and other disadvantaged persons into the work-force through training as public servants or school teachers.6 These programs were no doubt significant, even though they composed only a small share of the education budget, because they delivered educational assistance programs directly to those most in need. Housing and Urban Development Finally, in the field of housing and urban development, the merging of all Winnipeg area municipal governments, known as unicity, provided more equality of local services and levels of taxation. Instances of wealthy and poor municipalities sitting next to one another did exist previously, the most blatant example being the high-income suburban municipality of Tuxedo, adjacent to the City of Winnipeg but unencumbered by the city's low-income citizens or social problems. The provincial government's recognition of this problem was shown in its white paper, Proposals for Urban Reorganization in the Greater Winnipeg Area, published late in 1970. Government spokesmen claimed that, if its reorganization proposals had been in effect in that year, then 80 per cent of the taxpayers in Metropolitan Winnipeg would have saved money.7 On the other hand, no amalgamations of school divisions took place and so some taxation and service disparities continued to exist. Perhaps the most important achievement was the prevention of future segmentation of Winnipeg muncipalities into poor inner-city municipalities and middle- and upper-income suburban municipalities. The government's white paper recognized that this was already tending to occur. "Social ills, and hence social costs, tend to concentrate in the core area. These costs have to be borne almost entirely by taxpayers in the central area, despite the fact that many of the people requiring social services and creating social costs have migrated to the central area from outlying communities."8 The Schreyer government's public housing program was aimed at providing better housing at a lower cost than was being provided by the private sector. However, the NDP was unwilling or unable to place family public housing units in certain areas, particularly in Winnipeg, when faced with resident or municipal government opposition. As a result, little family public housing was built in the areas where it was most needed - established neighbourhoods in Winnipeg. It also should be noted that most of the government's activity within this field was in response to proposals of and funded by the federal government. The

60 The Government of Edward Schreyer

provincial government needed to put up only 10 per cent of the initial investment in public housing, the remaining 90 per cent being covered by low interest loans from the federal government. The provincial government's equity was guaranteed by the high level of inflation in housing prices during the 19605 and early 19705. It is not possible to give all the credit or blame to the NDP or social democracy in general for the Manitoba government's public housing program. Whatever the goals of the program, they were addressed first by the federal government, a government under the control of the Liberal party throughout this period. The general conclusion is that some economic redistribution was effected by the provincial government, but the amount was quite limited and certainly would not have been sufficient to offset any major reallocation of resources within the economy by the private sector. That the NDP government would attempt some redistribution of wealth and income is hardly surprising, given the party's ideological position, but the government's ability to meet its goal was severely limited. The tax credit program and the other policy areas discussed here redistributed little of the province's wealth to the poor, in spite of the fact that, of the four criteria of a socialist government's effectiveness, the redistribution of wealth and income was the one to which the Manitoba government gave the greatest emphasis. The tax credit programs alone were consuming nearly one-tenth of provincial revenues by 1977 and yet were not having the impact claimed for them. This aspect of the democratic socialist formula could be applied by any government with mildly progressive or social welfare ideals, with little regard to the principles of social democracy. The Democratic party in the United States, the Labour party in Britain, and the NDP in Canada could be expected to transfer, if only to a slight degree, wealth and income from the rich to the poor. Indeed, within Canada, similar examples would be easy to cite of mildly progressive programs introduced by the federal Liberals, Ontario and Alberta Conservatives, and so on. The respective ideology of the party, whether socialist or capitalist, was not particularly relevant. EXTENDING GOVERNMENT OWNERSHIP AND CONTROL

In the election campaign of June, 1969, the new leader of the New Democratic party, Ed Schreyer, described the Churchill Forest Industries deal as "the blackest moment in Manitoba's economic history." Yet after he came to power a month later, it took the new premier more than a year to come to the conclusion that enough was enough, and apply for official receivership of the forestry complex.9

61 The Government's Policies

The CFI development at The Pas, Manitoba, was a product of the Conservative government of Duff Roblin and Walter Weir, its politicians and senior bureaucrats, particularly Rex Grose, the head of the Manitoba Development Fund, the province's primary lending agency.10 The development had been supported by much of the Manitoba economic and political elite, including both major Winnipeg daily newspapers, and a major consulting firm, Arthur D. Little Inc. "Indeed, the entire press of Manitoba, except for the left-wing magazine Canadian Dimension and the student newspaper of the University of Manitoba, gave the complex support from time to time because it was 'good for Manitoba'."11 The Schreyer government relied upon this conservative elite to such an extent that they did not seize the assets of the CFI complex until January 1971, almost one and a half years after coming into office. The seizure of the CFI complex by the provincial government was accomplished with very little preconceived, ideological planning. It could be said that the government more or less backed into the CFI take-over. The CFI complex - composed of the assets at The Pas of the Churchill Forest Industries, M.P. Industrial Mills, River Sawmills Company, and James Bertram and Sons (Canada) - consisted largely of tangible assets purchased with public funds but with no market share established for the sale of products of that complex. Unlike other major crown corporations in the province, the take-over of CFI and the creation of Manitoba Forest Products (Manfor) did not provide that governmentowned firm with a monopoly in the wood products industry. Manfor still had to compete with other firms, including those with logging and processing operations in Manitoba. Manfor was allowed - indeed required - to sell its products outside of the province. Nor did the government's take-over of the CFI complex meet with a large-scale public outcry. There were no mass demonstrations in support of the private owners of the CFI complex. From the planning stage of the wood-processing complex, Conservative politicians and bureaucrats and the businessmen with whom they worked all tried to restrict government involvement to financial support. The idea of establishing a crown corporation was not acceptable. Even equity participation (partial ownership) by the government was rejected. In the words of Duff Roblin, Conservative premier of Manitoba when the CFI scheme was accepted, "I would guess that as a general principle, when you get a natural monopoly like electricity or the telephones, that that's a very suitable thing for a crown corporation to handle ... our feeling was that when you got into a marketing situation in particular, that you'd have problems with a crown corporation, where there was a competitive atmosphere that really was not well adapted to civil service activities."12 Indeed, so fearful of a government take-over were the Conservative politicians and bureaucrats and the scheme's promoters that public funds,

62 The Government of Edward Schreyer

supposedly for use in the CFI development, were placed in a Swiss bank account. Testimony before the Commission of Inquiry into The Pas Forestry and Industrial Complex at The Pas indicated that senior bureaucrats of the Manitoba government had conspired with the businessmen involved "to get as much money as possible out of the country and beyond control by any Manitoba authority - because of the new fear the new government might stop the project."I3 The Commission of Inquiry found that during the late summer and autumn of 1969, in a period of three and a half months, $30 million was paid out by the Manitoba government: "The money came into Zurich much faster than it could be spent on the project and piled up in the contractor's bank account."14 Leaders in the NDP government were not opposed, to the same degree as their Conservative predecessors, to government ownership. But neither did they move, upon gaining office, in a positive and direct fashion. Indeed, the slowness with which the government moved may have cost the taxpayers of Manitoba millions of dollars more than if it had followed a more direct course of action. The Commission of Inquiry suggested that the government should have proceeded with a financial and engineering audit of the whole project within a few weeks of taking office: It must be remembered that in July 1969, when the Schreyer Government took office, the public image of the whole project at The Pas was very bad. Secrecy about the principals behind CFI, what appeared to be slow progress in construction, lack of co-operation by CFI in regard to employment of local labour, particularly Indians and Metis, repeatedly critical comments in the House and in the Press, these and other factors had produced a high level of suspicion, uncertainty and distrust, in which members of the new Government shared. Even assuming that ... the Government felt that it was dealing with honest and competent men, the situation was such that the Government, in our opinion, should have considered some action necessary.15

Yet nothing particularly effective was done at this time. However, after the provincial government finally did move to take control of the CFI complex, it did not attempt to dispose of those assets to private interests. In testimony before the Commission of Inquiry, Schreyer stated his belief "that if there is a very preponderant amount of financing by the Crown, in an industrial venture, then the Crown should insist on an equity ownership."16 Indeed, prior to the government takeover, the legislation governing the Manitoba Development Fund was amended to enable the MDF, later renamed the Manitoba Development Corporation, to move into an equity position with a host of firms, including Saunders

63 The Government's Policies

Aircraft and Flyer Coach, a major manufacturer of buses. The difficulty with the equity approach, as practised by the Manitoba NDP government, was that the MDC became a lender of last resort. The companies which it either agreed to lend money to or took an equity position in could not obtain financial backing elsewhere, usually because their economic position was precarious. The government was taking an equity position in firms which were more likely to generate losses than profits. Although born of a motivation to further economic growth, financial fiascos like Saunders Aircraft (which cost the provincial government millions of dollars) cost the NDP electoral support and gave the whole idea of crown corporations, government ownership, or government equity a negative image with both politicians and the public. And yet a traditional response of socialists to the economic problems of capitalist society has been to call for the nationalization of industries and increased regulation of the economy.17 Such a direct confrontation with the dominant interests of private capital leads to a high level of political conflict. But a democratic socialist government's willingness and ability to control economic activity, which is traditionally within the sphere of interest of private capital, must be counted as a primary indicator of its effectiveness. At this point, a note of caution must be introduced into the discussion relating the extension of government activity to democratic socialist theory. It is possible that the interests of private capital in general may be furthered in particular instances by the expansion of government ownership or control, even if that expansion may threaten the interests of particular individuals or groups. For example, the Manitoba government's take-over of the automobile insurance industry probably reduced insurance rates. This, in turn, could be expected to reduce the costs of operation to firms and to individuals. In other situations a limited expansion of government ownership may have little impact on the economic system as a whole, but may perform a social welfare function in providing employment or services for the poor. For example, the program of public housing implemented by the NDP government benefited most of those who moved into state-owned houses or apartments. It provided some of those at the bottom end of the income scale with a better standard of housing than they might otherwise have been able to afford. But private entrepreneurs were left to supply housing in the middle and upper price ranges, housing on which a sufficient profit could be made to be of interest to those entrepreneurs. The private housing market was left relatively untouched because state housing did not compete with or supplant most private housing, except the very oldest, least attractive variety. The government's land-banking program never really had the desired impact of holding down housing prices because little of the land was released for sale.

64 The Government of Edward Schreyer Autopac

At first glance, the introduction of public automobile insurance by the Schreyer government would appear to have been a major example of a greater degree of government ownership. The necessary legislation was passed during the second legislative session of the government's first term. But there may be some grounds for suggesting that the introduction of Autopac was a temporary aberration which was never to be repeated. There is considerable evidence available to explain why the government proceeded to implement public automobile insurance even against a highly organized and well-financed opposition to the plan.18 First, public automobile insurance had been a major plank in the platform of the CCF and then of the NDP for many years. In the neighbouring province of Saskatchewan, government automobile insurance had been established on a compulsory basis by the CCF a couple of decades earlier. Even when the CCF-NDP was defeated in 1964, public automobile insurance had been maintained by the succeeding, much more conservative government. This successful scheme served as a model to which NDP supporters in Manitoba and elsewhere could point as an achievement to emulate. As with few other issues, for Schreyer and his cabinet to have compromised the party's long-held position on public automobile insurance would have been an untenable step and would have alienated many supporters, including some MLAS and even ministers. It was the one program above all others which the government might have been expected to implement. Second, automobile insurance was a major public issue in many jurisdictions long before 1969. In Manitoba, a Special Committee of the provincial legislature investigated the automobile insurance industry in 1966. Elsewhere, special committees, Royal Commissions, and the like were being established to respond to the public outcry against high insurance rates, poor service, and unjust settlement of claims. As Premier Schreyer claimed in a major speech to the legislature, "The waste that is to be found in the present automobile insurance system is clear: Unnecessary duplication in advertising and administration; the need to take beyond reasonable amounts of time and money because of legal fees, court cases, the hardships that are forced on accident victims, the delay in the settlement of accident claims, all of this combines or conspires to force up - and it has forced up - the cost of insuring automobiles to the point where it is a subject of considerable comment on the part of many many many motorists."19 Third, the importance of the automobile insurance sector of the insurance industry should not be overestimated. Automobile insurance was second only to life insurance in producing revenues for the insurance

65

The Government's Policies

TABLE 5 Insurance Premiums Written in Manitoba, 1970 All classes other than life insurance Automobile insurance (earned) Fire insurance (earned) Sickness and accident insurance Other

$35,645,993 14,584,428 11,639,796 12,804,380

Subtotal

74,674,597

Life insurance Net insurance premiums Net consideration for annuities

53,641,855 26,041,467

Subtotal

79,683,322

Total

154,357,919

Source: Manitoba, Report of the Superintendent of Insurance 1971 (for the Year 1970).

companies - $35 million in automobile insurance premiums in 1970 compared with $79 million in revenue for life insurance that same year. But automobile insurance still contributed only 23 per cent of the revenues going to insurance companies, and, as the premier reminded his opponents, "For the large insurance companies auto insurance differs from the other forms of insurance in that in recent years most companies have shown a loss in the underwriting of such insurance ... Only in automobile insurance have the companies had to rely almost solely on the investment income as their source of profit."20 In 1975, the Manitoba Public Insurance Corporation was to begin to sell other forms of general insurance in competition with the private sector, not in a monopoly position. Even then, MPIC did not go into the business of selling life insurance, even on a competitive basis. Perhaps even more important from a practical political perspective was the diffuse pattern of business within the automobile insurance industry. The largest seller of automobile insurance in the province, Wawanesa Mutual, earned $5.4 million in insurance premiums in Manitoba. The next largest seller, Co-operative Fire and Casualty, earned $2.4 million in premiums, followed by the Portage la Prairie Mutual ($1.6 million) and the Allstate Insurance Company of Canada ($1.2 million). These four insurance companies together earned significantly less than one-third of all net premiums earned in the province. No other company earned more than a million dollars in net premiums. Only these few companies, Wawanesa Mutual most of all, had a great deal to lose from the

66 The Government of Edward Schreyer

introduction of Autopac. For most private automobile insurance firms doing business in the province, Manitoba accounted for only a very small percentage of their total business. The diffuse nature of the industry explains why so much of its fight against public auto insurance was carried on by its lobby group, the Insurance Bureau of Canada.21 The IBC seemed particularly necessary in this situation to coordinate the effort of those firms selling automobile insurance in Manitoba. The automobile insurance industry was relatively low-skilled, it required no marketing outside of Manitoba and was serviced by a large number of small firms. The government estimated that there were 1,167 automobile insurance agents in Manitoba but that half of them received less than $2,000 a year from auto insurance. The members of this group were receiving, on average, less than 25 per cent of their total income from auto insurance, the remainder coming from the sale of other forms of insurance or from other sources.22 The automobile insurance companies received relatively little in the way of long-term capital for investment - especially in comparison with life insurance or pension plans — and they were not highly profitable. It was, in effect, one of the least attractive parts of the insurance industry from the perspective of the private firms. Once the NDP government had made up its mind to take over the automobile insurance industry in Manitoba, it moved to quell the dissidence. It compromised much of what it had set out to accomplish when it offered two types of concessions - ideological andfinancial- to the affected interests. The first permitted the supporters of private enterprise to maintain their beliefs unchallenged. None of the norms of the private enterprise ethic was challenged. Indeed, one of its bases economic efficiency - was being promoted by the supporters of public auto insurance. The second type of concession permitted the private industry to continue to receive some financial benefits, even after its primary role had been abolished. First, in the government's campaign little or no attempt was made to promote Autopac as part of a general expansion of government control and ownership. Public automobile insurance was not seen as good because it had anything to do with socialism, it was good because it was more efficient - largely because of its monopoly position. At the time of the 1969 provincial general election, NDP spokesmen claimed that Autopac would reduce automobile insurance premiums by 20 to 30 per cent. In 1970, when a committee of the Legislative Assembly reported back its recommendations that a universal, compulsory, government automobile insurance plan similar to that in Saskatchewan be implemented in Manitoba, the NDP members of the committee based their arguments almost entirely on the lower cost to the consumers of public auto insurance. The only exceptions were Sid Green, a cabinet minister,

67 The Government's Policies

and Cy Gonick, a backbench MLA, who felt that the investment opportunities from premium income also were an important justification for Autopac. Second, the government offered straight financial concessions to the private insurance industry. This was done in three ways: 1 sale by private firms of supplementary automobile insurance; 2 sale by private insurance agents of public supplementary coverage and public basic coverage, as well as private supplementary coverage, even though sale of the basic portion of the plan could have been handled through the mail or through the regional Autopac claims centres; 3 direct compensation to the auto insurance agents for the loss of part of their business, almost a form of severance pay for people who had never worked for the government.

Such financial concessions were helpful politically because they did a great deal to defuse opposition both to Autopac and to the government. Soon the insurance industry was divided into two camps. The insurance companies and their lobby, the Insurance Bureau of Canada, continued to oppose any public involvement in the sale of automobile insurance, whereas the insurance agents and their lobby, the Insurance Agents' Association of Manitoba, who had to deal with the Manitoba Public Insurance Corporation on a regular basis, were concerned with obtaining the most favourable working conditions possible. In terms of practical politics, this was undoubtedly a favourable situation for the government. But for public automobile insurance, concessions to the insurance industry raised the cost of operations, pushed up rates, and held down benefits. As the premier admitted to the Legislative Assembly, I must acknowledge that the proposal leaving the option open to agents for their continued involvement in the sale of the basic policy and the writing up of policy, that as a result of that, the savings available to the public from public automobile insurance, while still remaining very substantial, will be affected negatively, so that instead of thinking in terms of an across-the-province, province-wide average or aggregate average of a saving of something in the order of 15 percent in premiums on its province-wide average, we may be looking at something in the order of 11 or 12 percent, but I am confident that it will not be less than that and on that I am prepared to await the judgment of experience and of history.23

For the promotion of democratic socialism, the benefits were direct but not accumulative. That is, a portion of the private sector was transferred to the public sector. But little was learned that would have promoted

68 The Government of Edward Schreyer

demands for even greater expansion of the public sector, that is, very little which had not already been learned from government ownership of Manitoba Hydro, the Manitoba Telephone System, and all of the other government-owned enterprises in Canada. By the end of the NDP government's first term in office it appeared to have ceased to innovate, ceased to attempt any radical reforms of Manitoba society. In fact, it was tending to withdraw from some of those areas where innovation had seemed likely. This was nowhere more evident than in its pursuit of greater control and ownership of the economy by government. The example of Treasury Branches, and the government's failure to implement them, was discussed earlier. When first elected to office, the NDP was committed to a "program of total medicare including denticare and prescription drugs,"24 and in February 1970 "Premier Schreyer announced a feasibility study to be undertaken regarding establishment of a crown corporation to manufacture drugs in Manitoba. "i5 Lower prices to consumers and jobs in local drug manufacturing and distribution plants were to be achieved through universal pharmacare, government purchasing and distribution, local manufacturing, and drug substitution. Within one year, in January 1971, an Advisory Committee on Central Drug Purchasing and Distribution was established which had terms of reference restricted to a central drug purchasing and distribution proposal. The committee's report, released in March 1972, included among its recommendations the "establishment of a Crown corporation for central drug purchasing and distribution," the passage of legislation "to empower a pharmacist to dispense drugs selected for central purchasing ... and allow them to substitute an equivalent" of brand name categories.26 In 1972, legislation providing for drug substitution was passed, although the act did not come into effect until 1974. In 1975 a program of universal pharmacare began in Manitoba. It reimbursed a family for 80 per cent of its prescription drug costs over $50. The difficulties with the government's approach, from a democratic socialist perspective, are obvious. The crown corporation to manufacture drugs was nowhere to be seen. Neither was there a government-owned purchasing and distribution system established. Production, purchasing, distribution, and the attendant activities like research remained in the hands of the private sector. What was implemented was a control device, drug substitution, aimed at restricting the costs of the program, and a social welfare measure, pharmacare, aimed at restricting the costs borne by consumers. Pharmacare may be seen as another example of what James O'Connor has referred to as the "socialization of costs and the private appropriation of profits," which he believes to be the cause of modern government's fiscal crisis. Drug companies were permitted to continue making profits. In fact, the demand for their products was

6 134. 137. 146-5°. 154, 164-5, 175; in other provinces 40, 69-70, 93, 154 Liberal-Progressive party 100, in, 116, 147 Little, Arthur D., Inc. 61 Lutheran church 16, 82, 85, 121-2, 152, 165, 179 Lyon, Sterling R. 27, 76 McConnell Advertising 136 McCormack, A. Ross 89 Maclnnis, Angus 101 Mackling, Al 104 McLaren Advertising 136 McLeod, Grant 103 Management By Objectives 3° Manifesto for an Independent Socialist Canada (Waffle Manifesto) 108 Manitoba, characteristics of 3, n, 80-7, 113, 185 Manitoba Club 148 Manitoba Farmers' Union 18 Manitoba Federation of Agriculture and Co-operation 18 Manitoba Federation of Labour 103, 138 Manitoba government departments and agencies 35-6, 75-6, 107, 158-9; Civil Service Commission 24, 46; Government Services 24; Public Works 24, 46; Colleges and Universities 24; Continuing Education and Manpower 24, 46;

Education 24, 42-3, 46, 58-9; Co-operative Development 24-5, 46; Agriculture 24, 36, 46, 150; Northern Affairs 24- 5,31, 46-7, 58; Renewable Resources and Transportation 24; Mines, Resources and Environment 24; Urban Affairs 24-5; Corrective and Rehabilitative Services 24; Health and Social Development 24, 43-7, 101; Manitoba Housing and Renewal Corporation 46-7; Highways 46; Finance 48; Manitoba Health Services Commission 49; Labour 154 -Central agencies: Planning Secretariat of Cabinet (Planning and Priorities Committee of Cabinet) 6, 26-30; Cabinet Clerk 25; Clerk of the Executive Council 26-7; Treasury Board (Management Committee of Cabinet) 26-7; Premier's Office 26; Cabinet Committee on Urban Affairs 28, 73 -Crown corporations and agencies: Manitoba Hydro 30, 48, 68, 86; Manitoba Telephones 30, 68; Manitoba Public Insurance Corporation (Autopac) 30-1, 63-8, 70-1, 78-9, 101; Communities Economic Development Fund 30; Manitoba Development Fund 30, 61-2, 76, 157; Manitoba Forestry Resources 30, 61, 70; Manitoba Trading Corporation 30; Leaf Rapids Development Corporation 30; Channel Area and Moose Lake Loggers 30; Manitoba

Mineral Resources 30, 69; Saunders Aircraft 62-3, 70; Flyer Coach 63, 70; Manitoba Liquor Control Commission 137 Manitoba New Democrat 137 Marsh, Leonard 97 Marxism 4, 9, 89, 91, 96, 108, 169 Medical care insurance premiums 5, 40-1, 55 Mennonite church 15, 81-2, 85, 121, 143, 147-9, 151-2, 179 Michels, Robert 9, 140, 167; "iron law of oligarchy" 140, 167 Miller, Saul 77 Minimum wage 5, 57-8 Mining industry 69 Molgat, Gil 13 Molson's Brewery 136 Morris, William 90 Municipal government in Winnipeg 6, 22, 59, 73-5, 77-8, 163-4; Metropolitan Corporation of Greater Winnipeg 73-4; white paper 73-4; Community Committees 74-5; Resident Advisory Groups 74-5; Committee of Review 75 Mutual Acceptance Corporation 136 New Brunswick 38, 41, 52, 55> "3> l83 New Careers program 57 New Democratic party (federal) 102-9 New Democratic party (Manitoba) 3, 5, 6, 13-15, 32, 36-8, 72-3, 103-4, 116, 118-23, 125-41, 148-51, 154, 164-5, l67> 175, 177; platform 5, 6; conventions 71, 139, 151, 165; municipal candidates 74-5; New Party 103-5;

213 Provincial Council 128-30; Legislative Liaison Committee 128-30; provincial secretary 129-30; finances 133-8, 165; "Box 500" 137; caucus 138-9, 143-150; policy making 138-41, 151, 165; New Democratic Youth 139Newfoundland 38, 41, 52, 55, 112-13, 183 New working class 16-17, 154-5 Norris, T.C. 88 Nova Scotia 23, 38, 55, 113, 135. 183 Ombudsman 5 Ontario 3, 7, 23-4, 38, 43, 52, 55-6, 60, 72, 80-1, 87, 100, 112-13, X 3 2 > J 3 5 > 138, 183; migration into Manitoba 52, 81, 115 Orders-in-council 20 Owen, Robert 90 Parasiuk, Wilson D. 29 Parkinson, J.F. 97 Paulley, A.R. 19, 154 Pawley, Howard 29, 104, 131, 152 Perfumo, Dario 136 Pharmacare 68-70 Planning, economic 70-2, 90-1, 106-7, 109; regional land use 72 Planning, Programming and Budgeting System (PPBS) 29-30 Polish ethnic group 16, 82-3, 121-2, 146-9, 151, 165 Portage la Prairie Mutual Insurance Company 65 Post-industrial society 17 Presbyterian church 85, 121 Prince Edward Island 38, 52, 85, 112-13, '83 Private and parochial schools 139

Index

Progressive-Conservative party. See Conservative party Progressive party 93, in. See also LiberalProgressive party and United Farmers Protestant churches 15, 121-2, 124, 152, 175, 179, 184 Provincial Employment Program (PEP) 7, 57, 71; Special Municipal Loans and General Emergency Fund 71-2; Inner City Employment Program 72; Special Employment Program 72 Public debt 47-8, \ 163-4; leadership contest 13-14, 19; ethnic and religious background 14-15; election victories 14-15, 18-19, 80, 109, 114, 119-20, 125-7; MLA *8> 130-2; MP 18-19; and CFI take-over 60-2, 157; governor-general 76-7 Schreyer, John and Elizabeth 15, 155 Schreyer, Lily (Schulz) 17, 19 Schulz, Jake 17-18 Scott, F.R. 97, 101, 106 Second (Socialist) International 91 Selkirk constituency 19, 131 Shaw, George Bernard 92-3 Sherrit Gordon Mines 137 Social Credit party 14-15, 40, IOO, I2O, 123, 147, 149,

Rent controls 71, 77, 79 Republican party (U.S.) 8, 118, 124, 176 Rhineland constituency 15 Roblin, Duff 19, 23, 36-7, 61, 73, 101, 147 Roman Catholic church 14-16, 18, 85, 121-4, 143-4, 151-2, 165, 175, 184 Roosevelt, Franklin D. 54 Russian ethnic group 121 Safeway (Canada) Stores 86 St Boniface constituency 15 Sales taxes 39, 41 Saskatchewan: CCF-NDP government 3, n, 15, 22-3, 38, 4°-i. 43-4. 47. 55, 64, 66, 70, 77, 80, 99, 100,102,108-10,130,132, 134, 138, 155-7; economy 85-6, 112-13, J ^3 Scandinavians. See Icelandic ethnic group Schreyer, Edward R.: as premier 6-7, 20, 48, 76, 125-7, 129, 131, 141,

1/5

Socialism 3-12, 98-9, no, 112, 117-18, 126-7, 163-4, 168-70; economic inequality 4, 6, 8-9, 52, 54-60, 106; government ownership 4-6, 52, 60-70, 96-7, 101, 106-7; planning 5-6, 52, 70-2, 90, 96, 106-7; public participation 5-6, 52-3, 72-6; full employment 7, 90-1; revolutionist vs reformist 91-2,98-9 Socialist parties: Socialist Labor party 89; Socialist party 89; Canadian Socialist League 89; Socialist party of Manitoba 89; Workers' Alliance 93-4; Socialist party of Canada 93, 142; Social Democratic party 93; Dominion Labour party 93-4; Independent Labour party 93-4, 100, 104, in, 115, 131, 139-40, 152; Trades and Labour

214 Councils 93; Canadian Labour party 93-4 Social Planning for Canada 95. 97-9. 106 Social Purpose for Canada 105-7 Spivak, Sidney 125-6 Springfield constituency 18-19 Spry, Graham 97 "Stay option" policy 72 Stevens, H.L. (Len) 135 Stewart, Alistair 157 Stinson, Lloyd 103 Structural-determinist mode of explanation 8 Student aid 58 Swailes, Donovan 103 Syndicalism 89-90 Taxes, progressive vs regressive 41-2 Taylor, Charles 108 Transfer payments 39-40, 42, 49-50 Treasury bills 48 Treasury Branches 7, 68 Trudeau, Pierre-Elliott 13-14, 19, 76-7, 106, 108-9 Ukrainian Catholic church 16, 82, 85, 121-2, 165, 179, 184 Ukrainian ethnic group 16, 81-3, 121-3, r46"9> I5I. 164, 178, 184

Index

Underbill, Frank 95, 97 Unemployment 4, 7, 10-11, 34-5. 57. 71-2, 87, 90-1, 96 Unions 88-90,93-4,102-4, 112-13, I22 > 128-30, 132, 138-9; financial support for CCF/NDP 134-6, 138; United Steelworkers of America 135, 138; Retail, Wholesale and Department Store Workers 135; International Association of Machinists 135; Canadian Brotherhood of Railway, Transport, and General Workers 135; Railway, Airline and Steamship Clerks 135; United Auto Workers 135; Canadian Food and Allied Workers 138; Canadian Union of Public Employees

Uskiw, Sam 150 Utopianism 90-1 Versatile Manufacturing 86 Voting age 5

Waffle movement 139 Wage controls 70-1, 78-9 Wawanesa Mutual Insurance Company 65 Webb, Sidney and Beatrice 92 Weir, Walter 13, 19, 27, 61 Weldon, John C. 28-9, 106 Welfare state 10, 91, 97, 166 Wescana Hotels 136 White Paper on Health Policy j Winnipeg 7, 14-16, 18-19, 50, 59, 61, 81-2, 84, 86-90, 100-1, 103, 116, 119-23, 131-2, 134-5, 140, 145, 147, 149, 152-3, 164, 173. See also Munici138 pal government in Winnipeg Unitarian church 143, 152, 179, 184 Winnipeg Declaration of United Church 82, 85-6, Principles 101-2, 104 Winnipeg and District 121-2, 143-4. i5 2 > !79> 184 Labour Council 103 United Farmers 80, 93, in, Winnipeg North Centre 115-16 constituency 120-2 United States 81, 89-90, Woodsworth, J.S. 92, 98-9 no, 118, 124 Work Activity Projects 7, 5 7 University of Manitoba 16, Workers' control 76 18, 61