Welfare State

 

mardi 20 janvier 2015

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Despite Canada’s tradition of centralized control of the economy, governmental intervention into the organization of society and its implication in welfare institutions remained limited until the second half of the 20th century. One important reason was that the BNA Act had firmly placed health care and other welfare areas within the provincial sphere.

 

In fact, the US developed centralized welfare programs before Canada. In the US, the two great periods of welfare-state building were the 1930s with the New Deal (Social security) and the 1960s with the Great Society of LB Johnson (Medicaid).

 

In Canada, the turning point was WW2, when the federal government instituted a wide range of measures to facilitate Canadian involvement in the war, including controls on rents, prices, wages and materials, the regulation of industrial relations, veterans pensions, land settlement, rehabilitation and education, day nurseries and the recruitment of women into the paid work force. In 1944, family allowances were established. The federal government was redefined as the provider of social security and Ottawa’s spending power used to create federal programs even in areas of provincial jurisdiction. “Canada went into war a small, laissez-faire, moderately conservative state and emerged with a commitment to a full-scale welfare state under Keynesian economic management”[1].

 

After re-election in 1945, the postwar Liberal government of Louis Saint Laurent initiated public housing programs, federal hospital grants and assistance programs for disabled and blind persons. In 1951, universal old-age pensions for those over 70 were established and an amendment to the Indian Act extended the application of provincial social welfare legislation to native people. Lastly, the first permanent program for the funding of social assistance, the Unemployment Assistance Act, was put into place in 1956.

 

In 1957, the Liberal government was defeated in favour of the Progressive Conservatives under John Diefenbaker. Nonetheless, the building of the welfare state continued, with the launching of permanent programs for the funding of hospitalization, higher education and vocational rehabilitation.

 

The Liberal Party under L.B. Pearson was returned in 1963;  influenced by the American "war on poverty" and helped by the growing economy of the 1960s, Pearson's Liberal government presided over the introduction of 3 major pieces of social legislation which constituted the last building blocks of the Canadian welfare state:

  • The Canada Pension Plan, which established a national compulsory contributory pension plan;

  • The Canada Assistance Plan, which consolidated the Unemployment Assistance Act;

  • Medicare, which established a national system of personal health insurance.

 

The long period of growth and prosperity upon which the welfare state rested came to an abrupt end around 1973 and no additional welfare program was adopted after the 1960s. However, the programs of the 1960s, especially Medicare, had come to be considered as defining characteristics of the Canadian nation, a “sacred trust” to be preserved.

 

In the US and Britain, Ronald Reagan and Margaret Thatcher began to erode welfare programs in the 1980s but in Canada public opinion reacted sharply when the Mulroney Conservatives appeared to undermine “the sacred trust” of social programs.

 

By early 1990s, after a decade of debt economic decline and a rising budget deficit, the Canadian debt represented 60% of the GDP. The Conservatives tried to remedy this by introducing the GST (a tax on goods and services modelled on the European tax on added valued) and were defeated in the 1993 elections. But in the mid 1990s, under the Liberals, the Canadian state began to contract after a generation of welfare state expansion. The federal government not only retained the GST but started a five-year program of fiscal restraint with spending cuts and reduced transfers to provinces. Meanwhile, provinces and municipalities also went on draconian fiscal regimes to reduce their debts; at all levels of government, schemes were developed to charge users, contract out services, and privatize.

 

Nonetheless it is clear that the welfare state retreated further and faster in the US and GB than in Canada, which, at the turn of the 21st century, remained equipped with a social safety net. This is true even today, under Stephen Harper’s Conservatives whose ideology is, in a way, a return to the Canada of the 1930s, the last decade before the welfare state view triumphed. Even today, Canadians are fiercely attached to their free universal Medicare system and believe it makes Canada a better country to live in than the US.

 

Nobel-prize winner Paul Krugman argued that, along with the regulation of the banking system, the continued existence of a social safety net is the reason why the economy contracted less violently in Canada than in the US in the 2008 crisis.

http://www.thestar.com/business/2010/08/16/canadas_more_humane_society_saved_economy_krugman.html

 


[1] H.V. Nelles, A Little History of Canada, Oxford University Press Canada, 2005, p. 198-200