Jane Jacobs: part II of Montreal and Toronto

Please see the Contents and chapter one.

Part II (pages 16 to 25) of chapter 2.

From The Question of Separatism: Quebec and the Struggle over Sovereignty (Jane Jacobs, Random House, New York, 1980)

For discussion purposes as allowed under the fair dealing exception of the Copyright Act.

A culture can persist without its own metropolitan capital, as Quebec's did for so long. It can persist as a museum piece. But is cannot flower and thrive without a metropolis. French Quebec has its own cultural metropolis now. But to continue thriving as a culture capital, Montreal must also thrive economically. There's the rub. As a regional Canadian city, which is what Montreal has now become, its economic future is unpromising.

To understand why this is so, we must be aware of Canada's customary view of economic life and its traditional approach to economic development. Canada exploits and exports resources, to the neglect of developing industries and services based on manufacturing or inventions requiring manufacturing. This is a profoundly colonial approach to economic life, but in Canada's case economic colonialism is not something forced upon the country. Canada prefers colonialism.

The experience of Canada has been that the largest and most quickly obtained fortunes, whether public or private, come from resources: furs, timber, apples, coal, iron, nickel, gold, copper, silver, wheat, cobalt, fish, uranium, hydroelectric power, aluminum, potash, oil, natural gas -to name some of the most influential. Societies, like individuals, are shaped by their experiences. Canada's get-rich-quick experience with resources has shaped all the country's major institutions: the national government, the provincial government, the banks and all other financial establishments. It has shaped the way venture capital and subsidies are used, the types of development schemes contrived, and the assumptions of almost everyone in authority. These are not easy things to change.

When a single dominant approach to economic life and wealth has been pursued as consistently and as long as it has been here, the experience gets thoroughly built into how things work. It especially gets built into the uses of capital. Dazzling sums of money are available for resource exploitation and for vast construction projects associated with them, such as dams, pipelines, refineries, bulk storage and depots. When the attention of government does stray to manufacturing or innovation, as it does from time to time, the scale of effort does not adjust. Dazzling sums of money sunk into grandiose technological schemes. To put if figuratively, if the Canadian economy were a zoo, nothing would be purchased for it except elephants.

For various reasons, many of the essays at innovations come to nothing. Some prove unworkable, like the chemical cellulose plant in the northern Quebec wilderness on which ITT lost $600 million before closing it down virtually unused, and into which the Quebec and federal governments also poured $40 million for forest equipment, roads and other support systems. Some are economically unsuccessful, like the abandoned heavy-water plant in Laprade, Quebec, which cost the two governments, federal and provincial, about $485 million. Some are plagued by bad luck and unanticipated competition, like the nuclear power system called Candu, for which the federal government has paid out $2 billions, but for which it has not been able to find the export markets that were expected to justify the investment. Sometimes endeavors that actually do appear to be succeeding are abandoned because the government's bureaucracies and political leaders become nonplussed at the intelligence and patience they require, as happened when Avro aviation design and manufacturing company was written off after $400 million had gone into it. Not only grandiose innovations but grandiose imitations sometimes fail as well, like the oil refinery in Come-by-Chance, Newfoundland, bankrupt with $600 million in debts; the Newfoundland government holds a second mortgage of $45 million. (The holder of the first mortgage, who is proposing that the almost unused refinery be sold for scrap , is a London bank whose investment was guaranteed by the British government's Export Credits Guarantee Department.) The money that goes down the drain with each grand failure becomes a nine days' wonder.

In contrast, pitifully little capital, and even that confined mainly to Ontario, goes into initially modest innovative work. A company capable of producing and improved solenoid valve for a chemical reactor plumbing systems or an efficient new type of windburning stove is not the kind of company likely to find the modest risk capital required for such ventures. And there is almost no capital for the many small producers of bits, pieces, tools and devices that the practical and economically successful development of an innovative and diverse economy requires.

All this has many consequences. One was summed up by J.J. Brown, the historian of Canadian technology, in 1967;

"Canadians have made contributions to world science and technology out of all proportion to their small numbers. Some Canadian inventions made possible world industries, but we have ended up importing from England, Belgium, Italy and the United Stated billion of dollars worth of equipment invented here. This is our basic problem as a nation... If not corrected soon, it will leave us unable to compete as an industrialized nation in the modern world."

Canada is a heavy importer of humdrum and very simple consumer goods, things like hatchets, canoe paddles and waterproof match containers, and also of almost all kinds of basic industrial tools. "Orders Up, Backlogs Twice Normal for Machine Tool Industry," proclaims a December 1979 news headline in a Toronto paper. The print below proceeds to tell that the information that "this is more or less a boom year" comes from the Canadian Machine Tool Distributors Association. "Since there are only a few Canadian machine tool manufactures," the report explains, "it is the distributors who dominated the Canadian marker."

To be sure, Canada does not lack manufacturing altogether. There are uses for those imported machine tools. But of such manufacturing as the country does have, almost half is undertaken in American-owned branch plants, and -increasingly- some of the rest in other foreign-owned branch plants.

When a Canadian manufacturer does manage to get started and become successful, capital can seldom be raised for expansion of the work. This impasse is typically solved by the company's selling out to a foreign corporation. It becomes a subsidiary or a branch plant.

Most branch plants have been established, however, because of Canadian tariffs on manufactured goods. With its scanty development of producer's goods and services, Canada is in poor position to replace wide ranges of imported goods and services with its own production, as developed economies do. Canadian tariffs are imposed not to encourage indigenous economic development, but to force foreign exporters of manufactured goods to set up branch plants within Canada. This profoundly parasitic approach to "development" was largely responsible for Toronto's and Montreal's economic growth during the 1950s and 1960s; that was largely branch-plant economic growth. Branch plants in Canada must be extremely profitable because the prices charged for their goods tend to equal the price of the equivalent imports plus the high tariffs; there are few or no Canadian producers to compete. The branch plants justify their high prices by setting their own book values on components they import from other subsidiaries. And, of course, a large share of profits leaves the country.

Since there are few indigenous Canadian manufacturing enterprises available to be transplanted -as they expand- out into towns and villages where work and wages are desperately needed, the federal and provincial governments offer dazzling sums of money to foreign branch plants for that purpose too.

Naturally, all this drives Canadian economic nationalists into a fury, but even they are so unfamiliar with the fact that many modestly started enterprises go into creations of a diverse and innovative economy that they define economic colonialism narrowly and superficially. They think of it mainly as matter of ownership, to be corrected by changes in ownership -rather than as something that can only be corrected when the economy undertakes things it now fails to do.

In this traditional scheme of things, Canada's regional cities also have their traditional role. They work primarily as service centers for the exploitation of resources from their hinterland. To be sure, all have some manufacturing, even the small ones like Halifax, Thunder Bay and Saskatoon and the larger ones like Winnipeg, Calgary and Edmonton, as well as the largest, Vancouver. But large or small, the regional cities of Canada do not serve as creative economic centers in their own right. They boom when the exploitation of their hinterland booms. They stagnate when the resource exploitation reaches a plateau. They decline when it declines.

This is devastating to Canadian regions where resources stop yielding more and more wealth. The passive regional cities, generating no innovations, replacing so few kinds of imports, creating so little new work, so few factories fro transplanting, so few new markets themselves, cannot serve as substitute resources. Halifax, which boomed long ago when exploitation or resources in the Maritime Provinces boomed, cannot perform such services for the now impoverished Maritimes (Nova Scotia, New Brunswick and Prince Edward Island). Winnipeg, although it boomed when the wheat lands of the prairies boomed and was celebrated as the locus of the largest grain exchange in the entire world, promptly stagnated when the tasks of settling the prairie wheat lands and constructing the vast grain transportation and storage facilities had been more or less completed. Probably the currently booming Alberta oil cities of Edmonton and Calgary will stagnate in their turn -for the pattern is a consequence of Canada's curiously lopsided use of capital and its profoundly colonial approach to economic life.

In Quebec, other cultural differences notwithstanding, the economic culture is now the same as that of English Canada. Perhaps this is because English Canada dominated Quebec economically in the past, or perhaps that fact made no difference. Whatever the reason, Quebec political leaders think, economically, exactly like most of their English-speaking counterparts. The present premier of the province, René Lévesque, an ardent Quebec nationalist and the chief proponent of sovereignty-association for Quebec, makes it clear in his writings and speeches that Quebec's economic future, as he sees it, depends on assiduous exploitation of exportable resources -and when possible, semi processing them before export. Claude Ryan, leader of the provincial Liberal Party and Lévesque's chief political opponent, sums up Canada's economic past, present and future in these words:

"For a long time, the settlement and the cultivation of Canadian land was concentrated on a narrow band about one hundred miles wide along the United States border. But today, we are much more aware of the extraordinary wealth hidden beneath the sea on our coasts and in the vast regions of the north. Rich in minerals of all kinds, in petroleum and natural gas, in fresh-water lakes and in rivers, and in forests, these areas are already the basis for a number of immense projects such as the one at James Bay, the Syncrude installations in Northern Alberta and the petroleum drilling program in the Atlantic Ocean. And this is only a beginning. These vast territories provide us with the promise of almost unlimited developments in future years and make us the envy of other countries."

The mayor of Montreal, who like Lévesque and Ryan is ardently French, has announced that the economic future of the city is rosy because it is in a good position to entice branch offices and branch plants from Europe.

I have singled out these three because of their positions, not because their faith in economic colonialism and their lack of interest in either human inventiveness or the economic possibilities of cities are unusual or extraordinary. They are very Canadian. If Montreal had not happened to be the national economic center of Canada in the past -if Halifax, say, had occupied that role or if Toronto had fallen into it much earlier than it did- Montreal would surely have been merely a passive regional city, stagnant long since. At any rate, there is little in French Canada's experience, assumptions or expectations of economic life to suggest otherwise.

Now, however, Quebec is presented with a difficulty not only unprecedented here, but unprecedented in Canada. The country has never before had a national city which lost that position and became a regional city. As a typical Canadian regional city Montreal cannot begin to sustain the economy or the many unsual assets it has now. As it gradually subsides into its regional role, it will decline and decay, grow poor and obsolescent. No boom in resource exploitation can save it because -as a national center- it had already surpassed what even the most prosperous Canadian regional cities are capable of supporting. None of the traditional Canadian approaches can contend with this new problem.

A third of Quebec's populations is concentrated in Montreal. Not only will a declining Montreal have directly depressing effect upon that large share of the province's populations, it will have a depressing effect of the province generally. The city will become a poorer market for producers in the hinterland who now depend on it. It will be a declining source of city jobs for the population at large. Its all-important cultural function in the province's life will suffer.

In sum, Montreal cannot afford to behave like other Canadian regional cities without doing great damage to the economic well-being of the Quebecois. It must instead become a creative economic center in its own right. That means it must cast up streams of new enterprises which, among them, take to producing wide ranges of goods now imported from other places, including other places in Canada, and which will generate new, city-made products and services that can be marketed outside of Montreal and Quebec as well as within; and it must become the kind of place where such enterprises can find the capital they require, and in turn generate more capital.

Yet there is probably no chance of this happening if Quebec remains a province. Canadian bankers, politicians and civil servants, captivated as they are by the sirens songs of resource exploitation, ready-made branch plants, and technological grandiosities, can hardly be expected to respond to Montreal's quite different economic claims upon their attention. Beliefs and practices common to all of Canada are not apt to change simply because one city, Montreal, and one province, Quebec, so urgently need them to change.

The Quebecois themselves seem unaware of the nature of the problem which looms in their future, and given the prevailing assumptions, they may not come to understand it. But they will understand this: things are not going well.

That is why the issue of sovereignty for Quebec, now that it has been raised anew as a possibility, is not going to evaporate. Inevitably, whether or not they could do better on their own, the Quebecois are going to think they could, and many of them are going to want to try. We may expect the question of separation to be raised again and again in coming years until it is finally settled either when Canada accedes to some form of sovereignty for Quebec or when the Quebecois accept the decline of Montreal and become resigned to it and to its repercussions.

The latter seem to me unlikely. Quebec is not like the poor Maritime Provinces, which have been tied ever more tightly into Confederation by adversity and the federal government's redistribution of tax money to alleviate it. The Quebecois have a special fear: that is they themselves cannot make a success of Quebec, their long struggle will prove to have been "a sad tale told by a minority on the road to oblivion." That is how the old story of separatist sentiment in Quebec ties the new story.

While it is quite possible that Quebec would do no better on its own than as a province of Canada, there is little reason to suppose it would do worse, and there are even some practical reasons, which I will touch in due course, for supposing it might to better. Furthermore, as we all understand, dependence is stultifying, and sometimes the obverse is also true. That is, sometimes independence releases new kind of effort, opens up formerly untapped funds of energy, initiative, originality and self-confidence. That has been the experience, for instance, of Norway when it broke away from Sweden at the beginning of this century.

References

Population growth comparisons are derived from census figures of Statistics
Canada.

The quotation on Canadian inventions is from Ideas in
Exile, by J.J. Brown (Toronto, McClelland and Stewart, 1967). This is a basic
work for light on the Canadian economy.

The economy's reliance on
branch plants, which I have summarized, and the attitudes behind it are
exhibited in the press almost daily. A commonplace example from the Nelson
(B.C.) Daily News (January 22, 1980) quotes one of British Columbia's senior
civil servants, the Deputy Minister of Forests: "If we export this inexpensive
(hydroelectric) power, we make it attractive for firms to locate in Washington
and Oregon. If we kept the cheap power here, perhaps companies would move to
B.C. and create employment here."

Two important recent books
illuminating the subject of Canadian economic attitudes are: The Arrow, by James
Dow (Toronto, James Lorimer, 1980), and C.D. Howe, a Biography, by Robert
Bothwell and William Kilbourn (Toronto, McClelland and Stewart,
1979).

Figures on the losses entailed in grandiose failures are
from: "How ITT Got Lost in a Big Bad Forest," by Carol . Loomis, Fortune
(December 17, 1979).

Personal communication, Atomic Energy of
Canada, Ottawa.
Personal communication, Ontario provincial reasearch staff,
New Democratic Party, Toronto, and Atomic Energy of Canada.
Dow, op.
cit.
The Globe and Mail, Toronto (February 8 and 12, 1980).
The quoted
phrase "a sad tale..." is from René, a Canadian in Search of a Country, by
Perter Desbarats, rev. ed. (Steal Books; Toronto, McClelland and Stewart-Bantam
Ltd., 1977).

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Chapter 3 .