UQAM's Nutty Professor

UQAM's finest

Last week, the francophone media was doing cartwheels trying to convince readers and viewers that Quebec isn't really a beggar province, a welfare bum living large on the Canadian dime.
It was all in response to Quebec billionaire depanneur king, Alain Bouchard saying exactly that in a speech before the Montreal Board of Trade.
Bouchard didn't mince words and told the audience that Quebecers should be ashamed of themselves for being so needy, something that didn't go down well with Quebec nationalists, as you can imagine.

And so certain journalists like Josée Legault were doing contortions, an editorial version of the TWISTER game, trying to find the right statistics that would counter what they believe is the myth that Quebec is indeed a beggar province. Link{fr}

I won't dissect their arguments, because it doesn't really matter,  Quebecers have come to believe that they are indeed beholding to Canada and a few commentators saying it ain't so, just doesn't matter.
Whether true or not, it is said that perception is more important than reality and even if it were true that Quebec doesn't live off Canadian largess, the notion that Quebec is a province living in part on ROC wealth is as well entrenched here in Quebec as the rest of Canada.

As I said before I'm not going to engage in a exercise of counterarguments to these articles, it's like pointing out the flaws in the arguments of the Flat Earth Society, but I am going to offer a translation of an article written by a UQAM (where else) professor, Jean Denis-Garon, one that few Anglophones would ever be aware of, because it was published in the Journal de Montreal and tucked safely behind a pay wall.

Le Québec est-il le BS fédéral ?

Is Quebec a stowaway in the great Canadian ship of prosperity? This has been recently suggested, as we receive more than $ 9 billion in equalization payments, this year. According to some, we should carry the stigma of a beneficiary province supported by the wealth created elsewhere. It is argued that an economically inert Quebec should create more wealth as quickly as possible.

Seven out of ten provinces receive equalization. Even the manufacturing heart of the country, including Ontario, now seems helpless against the provinces teeming with hydrocarbons. To free ourselves, we are generally suggested to maximize exploitation of our natural resources.

These resources are actually the heart of the problem of the Canadian imbalance. Let's take a specific example : Alberta. It has significant oil reserves, which are nothing more than a bank account filled to the brim, but buried underground. Exploiting its oil, the Alberta government gradually depletes its treasury.

Alberta creates little wealth by exploiting its oil: it extracts. To an economist, this distinction is crucial.

With this extraction, Alberta has it both ways. Its government can both deliver better public services and lower taxes ... the dream of Mr. Leitao! Left to itself, Alberta would have a vampire effect on the Canadian federation. Providing its citizens with tax benefits incommensurate with their actual productivity, it would attract the youth, families and a qualified workforce from other provinces. It would take away everything those provinces need to thrive and become richer.

A big problem put in perspective..

Fortunately, equalization helps to correct this inefficiency. Helping Quebec to provide good public services at acceptable rates of taxation while making it less attractive to move to Alberta.

Equalization has the effect of discouraging profiteers from profiteering ... It is clearly light-years away from being a social welfare program. Moreover, the provinces can spend the money transferred by Ottawa as they see fit. Some use it to reduce taxes for the rich, while others prefer to pay for public childcare.

It is also true that equalization can have the effect of a tax on our economic development, a failure in the program that can be corrected. Otherwise, it compensates us for the economic damage caused by the overheated exploitation of oil in other provinces: it is not a gift. It also encourages them to moderate their resources to better protect the environment and better accommodate future generations.

If Quebec wants to "get out of Equalization," let's hope it will create actual wealth. It should focus on education, try to attract more investment, in order to increase our productivity. It's an interesting paradox because without equalization which allows us to retain talent in Quebec, it would be more difficult to accomplish.

I'm not going to go into a big deconstruction of this piece, I'd like to point out a few facts and then let readers run with the discussion.

I guess things start off badly when the author, editor and fact-checker get the facts wrong right off the bat. Mr Garon claims that seven out of ten provinces receive equalization payments, which is wrong because it is six. Alberta, BC, Saskatchewan and Newfoundland do not presently collect. Which provinces get equalization fluctuates over the years, but right now it is six, not seven. It's hard to take the rest of the article seriously, when such basic error is presented so early in the article.

But six out of ten provinces still sounds like Quebec is in good company and so no standout, so this is the first line of attack for defenders of Quebec's good reputation

But it all boils down to these simple truths...
All Canadians contribute to the equalization fund through federal taxes and levies. But these contributions are not equal. Quebec, with 23% of the population pays in about 19%, we all know why.

But Quebec takes out $9 billion of the $16 billion dollar fund, or 56% against a contribution of about 19%.

PEI, the province that Quebec defenders love to hold up as an example as a bigger beneficiary of the fund per captia, takes out only about 2% of the fund.
Quebec defenders always talk about the per capita benefit to provinces, or how much each citizen benefits from the fund, because then Quebec doesn't seem like the biggest loser.
But like it or not, Canada sends $9 billion to Quebec and $340 million to PEI. To those who pay into the fund and receive nothing, that is all that counts.
Quebec defenders also point out that Ontario now gets equalization payments too, but never use the per capita argument here, because each Ontarian receives only about one-eighth of what each Quebecer receives. (QC- $1,130 per citizen, Ont.- $146 per citizen.) Link{fr}
Ontario takes out about 18% of the fund, while contributing over 40%.

Defenders of Quebec use both ends of the argument at different times, depending on circumstances, something Quebecers are famous for arguing, the idea that they are both a Francophone majority sometimes and a minority when it suits their purpose.

But what is most galling about this article is the nonsensical idea that pumping out oil from the ground is not real productivity, when indeed it is the very definition.
The idea that creating wealth by exploiting oil, or timber, or gold or zinc or uranium deposits or indeed creating electricity is not real productivity, is an argument that is beyond the pale for an economics professor.

The article smacks of an infantile jealousy and sour grapes and seems to desperately reach for any straw, no matter how unlikely.
I think my favourite part is when the good professor tells us that Albertans should pay higher taxes so to diminish its attractiveness.
It reminds me of the old Pantene Shampoo commercial.
"Don't hate me because I'm beautiful!"

The idea that a Quebec professor deems to be concerned about future generations of Albertans is just plain laughable.
Alternately, could you imagine an Albertan saying that the Montreal Canadians should be penalized and perhaps receive a lower draft pick as a penalty, because they've won too many Stanley Cups? 
It is almost as insulting as Desmond Tutu coming from that cesspool of a country of South Africa to give us life lessons. Beneath contempt!

At any rate, I can't imagine ever letting my child go to a university with such professors.
That is why so many highly qualified francophone students fight to get into McGill, because it says a lot about them.
UQAM versus McGill, the very definition of 'antithesis.'