Published on May 11, 2016

Liberty and Responsibility: Two Fundamental Concepts
21 August 2009

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On the masthead of my blog, you can read two words: “liberty” and “responsibility.”

These two concepts are the most important ones in my political philosophy.

I believe they are the foundation of a peaceful and prosperous society. They are necessary conditions for order and progress. They are the very basis for civilisation.

Those of you who already know me have often heard me talk about individual freedom and free markets.

As I noted in a recent video message about the ideological notions of left and right, when we debate an issue of public policy, the alternatives are usually to have the government intervene by imposing new spending programs and regulations; or to leave individuals free to cooperate among themselves and find a solution.

I have often observed that some people fear liberty because they are afraid of its consequences. They think that if we leave people free to do what they want, it will mean some kind of free for all where anybody can do anything. For example, where people will be free to steal, or to pollute, or to do dangerous things that will bring trouble to everyone else.

In other words, they are afraid that they will be the victims of other people’s freedom. They will bear the consequences of other people’s behaviour.

But that’s not what freedom is about. A free society is always one where there are basic rules protecting everyone’s freedom and property.

You are free to do what you want with your own person and your own property. But your freedom stops where the freedom of others begins. Nothing you do should have negative repercussions on other people or on their property, unless you had an agreement with them beforehand.

Freedom does not mean doing what you want and unloading all the consequences on the rest of society. On the contrary, to be free necessarily means that you have to be responsible for your actions.

So when we discuss government intervention, we absolutely have to take this into account. Ideally, governments should intervene as little as possible so that individuals are free to act as they want. But governments should also protect the rights and property of all citizens, and enforce agreements and contracts.

In particular, they should not do anything that would allow people to avoid taking responsibility for their actions. For example, in an ideal world, governments should not bail out those who made bad business decisions. They should not act as a collective insurance for everyone who took unnecessary risks. They should not, as is often the case nowadays, privatize the profits and socialize the losses.

If people understood this, perhaps there would be less fear of freedom, and a better appreciation of its fundamental importance.

I believe that Canadians are intelligent and responsible people who can be trusted. They know better than any politicians or bureaucrats in Ottawa what’s good for them.

I will leave you with this excellent quote from the great economist and philosopher Friedrich Hayek:

“Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions and will receive praise or blame for them. Liberty and responsibility are inseparable.”

Talk to you soon.

Published on May 11, 2016

10 September 2009

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Hi everyone,

If you follow financial news, you will have read dozens of articles and commentaries about the dangers of deflation since the beginning of the economic crisis. Deflation is the opposite of inflation. It is a sustained fall in the level of prices.

We are told that if we let prices go down, consumers will put off their purchases to benefit from even lower prices. This will reduce business activity, workers will get laid off, consumers will be even more reluctant to buy, and we will end up in a big depression like the one we had in the 1930s.

Almost everyone agrees that very high inflation is bad, but they tell us that deflation would be even worse.

This is one of the main reasons why central banks in most countries have flooded markets with new money and rescued failing banks. We had to do all we could to keep prices from going down, which would lead to a depression.

Well, there are several problems with this economic theory.

Let’s start with common sense and what’s happening in our daily lives. Do you, as consumers, prefer to buy stuff that is cheaper or more expensive? I think we all know the answer to that!

We are all consumers, and we all benefit when prices go down. If we pay less for one good, it means we have some money left to buy other goods.

Economic activity does not stop. It simply means we can buy more with the same amount of dollars. And more purchasing power means a higher standard of living for everyone.

In fact, there is nothing mysterious about the effects of lower prices. Think about computers.

Fifteen years ago, they were big, not very powerful, had few gadgets, and cost a lot more than today. Prices in the computer business have been going down all the time since then.

Have people stopped buying computers or waited years before buying a new one to benefit from even lower prices? Absolutely not. On the contrary, more computers are being sold as their prices go down.

But perhaps these are too anecdotal examples dealing with only a limited aspect of reality. The economy as a whole might work differently, and if you observe a sustained drop in the overall level of prices, you will get different results.

So I did a little search to try to find out what had happened in the past in periods when there was deflation.

Two economists at the Federal Reserve Bank of Minneapolis, Andrew Atkeson and Patrick J. Kehoe, did precisely this five years ago. Their paper is entitled “Deflation and Depression: Is There an Empirical Link?”

Their conclusion is quite interesting.

They examined dozens of episodes when prices went down in 17 countries over a period of a hundred years. In the large majority of cases, these were periods not of depression, but of economic growth. The only major exception is the period of the Great Depression.

This is what they conclude: “Overall, the data show virtually no link between deflation and depression.”

So! There you have it! The idea that falling prices lead to depression is simply not true historically. But it seems that almost nobody took the trouble to check the historical record.

Which makes you wonder if central banks did not overreact when they printed hundreds of billions of dollars to make sure we would not be entering a deflationary period.

Could deflation instead be a positive economic phenomenon? That’s what I will discuss in my next video message. Thanks for listening and see you then.

Published on May 11, 2016

28 September 2008

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Hello,

In my previous video message, I explained that contrary to what we hear or read every day since the beginning of the financial crisis, an overall decline in prices does not necessarily lead to an economic depression. This thesis is entirely based on the exceptional case of the Great Depression and it doesn’t fit with historical facts.

I concluded my message by asking if deflation was not instead a positive economic phenomenon. This is what I want to discuss with you today.

We all know that there is a sustained rise in prices when the quantity of money circulating in the economy increases faster than the quantity of goods and services. It’s easy to understand why. Something that is scarce is generally more valuable. But when it becomes a lot more abundant, it loses its value.

So, the more money there is, the more it drops in value, and the more consumers need to pay for the available goods. In other words, they have to give up more of these worthless dollars to obtain the goods.

This is precisely what’s been happening in most countries for the past decades. That’s because central banks never cease to create more money out of thin air, which causes prices to constantly go up. For example, they have gone up by 42% in Canada since 1990.

An overall drop in prices will occur when the opposite is happening. That is, when it is the quantity of goods and services that increases faster than the quantity of money. Also, logically, if both rise at the same rate, prices will stay more or less stable.

So, imagine a situation where central banks don’t manipulate the money supply anymore. And instead of continually rising at a rate of between 6 and 12% per year, as we’ve seen in Canada in recent years, the quantity of money in the economy stays the same.

Every year however, we become a little bit more productive. We create new goods and services. We find new methods to produce them more efficiently. Technology gets better. And if there is population growth, there’s also more people working.

So there are always more and more goods and services available in the economy, but we have the same quantity of money to buy them. Prices will obviously have to adjust by going down. If the economy grows, let’s say, by 3% a year, while the money supply grows by 0%, then we will necessarily get price deflation.

This is not just theory. It is what happened several times in the 19th century, in an era of rapid economic development. At a time when there were no central banks and when money was calculated as a certain quantity of gold or silver.

Note again the difference. Most economists and media commentators tell us that if prices go down, this will lead to some economic catastrophe. But in reality, the decrease in prices that I have just described happens precisely because we produce more things.

Deflation is not a threat to our prosperity. On the contrary, in a situation where the money supply is stable, it is the manifestation of prosperity!

Prosperity has nothing to do with the quantity of money that we have in our pockets, but rather with the quantity of goods that we can buy. And if we can buy more goods with the same amount of money because prices are lower, then we are more prosperous.

This is why there is no reason to fear a drop in prices. And why the interventions by central banks to prevent prices from going down may cause more harm than good to the economy.

The real debate that we should be having is about the constant creation of new money by central banks. Is this really necessary? Doesn’t it destabilise the economy? Who does it benefit? Don’t we get poorer when the goods that we buy always get more expensive?

I’ll have other occasions to raise these issues in future messages.

Until then, thank you for listening and talk to you soon.

Published on May 11, 2016

10 November 2009 

A journalist at the National Post, John Ivison, writes a column this morning that refers to a presentation I gave in 2004 on whether or not the creation of a federal securities commission would be in accord with the Constitution. As everyone knows, the topic has been in the news recently, when my colleague Jim Flaherty, the minister of Finance, announced that our government would ask the Supreme Court to give its opinion on the matter. This controversy has been going on for many years already.

As I told Mr Ivison when he contacted me, I haven’t changed my mind and I still believe that the Constitution allocates this power to the provinces. There is nothing secret in the position that I have defended and for those who would like to consult it, I have scanned the text of my presentation, which you can access here.

I am however very proud of the fact that contrary to what a liberal government would likely have done, our government has not imposed its legislative will on Quebec and other provinces who object to such a move and has chosen instead to ask the opinion of the Supreme Court. A conservative government will not encroach upon areas of provincial jurisdiction. This debate will be settled once and for all and our government will respect the decision of the Court and the Constitution.

One thing that is not mentioned in the article and that I would like to clarify is that I mostly became interested in this question when I worked as vice-president for corporate and international affairs at the Quebec Securities Commission (now the Autorité des marchés financiers) between 1997 and 2000. I gave the presentation a few years later at a colloquium on securities organized by the Canadian Institute in Montreal after I had become vice-president of the Standard Life of Canada.

Published on May 11, 2016

13 November 2009

Hello,

About two weeks ago, on October 27, I asked a question about the Canadian dollar to Bank of Canada governor Mark Carney who was appearing before the Standing Committee on Finance.

Over the past few weeks, Mr. Carney has stated several times that he would intervene to push down the dollar if it gets too high compared to the US dollar.

As you will see in the following excerpt, he agrees with me that there are advantages as well as disadvantages to having a strong currency. But his answer raises an interesting point about the way the Bank of Canada conducts its policy.

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Question: You have said several times that you will not hesitate to intervene if our dollar goes up too much against the US dollar.

From your declarations, we get the impression that a strong currency only has negative consequences, for exporting businesses and for economic growth in the short term.

However, a strong currency also benefits consumers by making imports cheaper; travelers who go to the United States; businesses who import equipment from the US; and investors who invest in other countries.

Also, there would be negative consequences if you intervened to prevent it. It would mean creating Canadian dollars in order to debase our own currency as fast as the Fed is debasing the US dollar. It is generally recognised that during the Great Depression, competitive devaluations made the crisis much worse.

So I would like to ask you if you agree that there are pros and cons to a higher Canadian dollar and if so, how do you proceed to make a balanced decision that takes all these factors into account?

Thank you.

Answer: Mr. Bernier is right, there are positive and negative conséquence to the strength of our currency. But what matters in the end is the impact of the exchange rate, coupled with all other internal and external factors, on global demand and the inflation rate in Canada. This is what determines the monetary policy of the Bank of Canada.

(NB: This is not a verbatim transcript but rather an adapted translation of the notes I used for my question as well as Mr. Carney’s answer.)

His answer is very clear. What determines the policy of the Bank of Canada is the impact of the exchange rate and all other factors on global demand and on the inflation rate in this country.

Whatever advantages or disadvantages there are to having a strong dollar, Mr. Carney says essentially that this is irrelevant, and only counts insofar as it affects the rate of price inflation.

As you may know, there is an agreement between the Bank of Canada and the Finance Minister to aim at a price inflation target of 2%. Right now, the price consumer index in Canada is below 0%. So, to meet its target, the Bank has to carry on a policy that will increase the rate of price inflation. One of the things it has done to achieve this goal was to drive interest rates close to zero.

This is also why Mr. Carney doesn’t like to see the Canadian dollar increase too much against the US dollar. This has the effect of lowering the price of imported goods and making business more difficult for Canadian exporters. It consequently drives down the rate of price inflation even more. Mr. Carney instead wants prices to increase faster. And so he says he is willing to intervene.

He would do this by creating Canadian dollars out of thin air and buying up US dollars with them, thereby pushing down the price of Canadian dollars on currency markets.

Now, as I have said many times in the past, I don’t believe monetary and price inflation is a good thing for our economy and for Canadian consumers. Inflation is the equivalent of a tax in that it devalues the money that we have in our pockets and bank accounts. It is true that most of us get salary increases that compensate for the loss of purchasing power. But those whose income doesn’t increase as fast as prices get poorer.

Monetary Inflation is a hidden way of redistributing wealth from some groups to others within our society. It also creates all kinds of market distortions and is the cause of the booms and busts that our economy has been going through.

The agreement on the price inflation target between the Bank and the minister of Finance is set for five years and has to be renewed next year, in 2011. I think this is a very good time to have a debate on the consequences of inflation. Should we lower the target to 1%? Or if inflation is bad, why not to 0%?

Come back to my blog if you want to hear more about this issue.

Thanks for listening and see you soon.

Published on May 11, 2016

7 December 2009

Hello,

Many of my acquaintances are hunters. Hunting is not practiced to the same extent today as it used to be, but it is a traditional activity that has always been part of the culture of the First Nations as well as the settlers who came to this country.

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Almost all these hunters, and the farmers who need to keep hunting rifles, are absolutely honest people who have never committed any act of violence against anyone.

Nevertheless, the law treats them all nowadays as potential criminals. In addition to the firearms possession and acquisition license, they have to periodically register each one of their hunting rifles.

A private bill proposed by my colleague Candice Hoeppner, bill C-391, is presently being examined in the House of Commons, with the purpose of abolishing the registry for long guns. It has already been adopted in the first two readings, and the final vote in the third reading will take place in a few weeks.

As you probably know already, this gun registry was set up by the liberal government in 1995, following the massacre that took place at Montreal’s École polytechnique twenty years ago. It was no doubt based on good intentions. But government policy should not be judged on its intentions but rather on its observable consequences.

This registry has been an administrative and financial disaster since the start. According to government estimates at the time, it was supposed to cost 2 million dollars; but spending on this program is now up to 2 billion dollars, a thousand times more. Imagine what could have been done with all this money.

The auditor general has stated in one of her reports that there is no evidence that the registry helps reduce crime. Very few crimes are committed with hunting rifles. The police can already know who possesses a firearm by consulting the list for firearms possession and acquisition licenses. And let’s be clear: the goal here is only to put an end to the hunting rifles registry. The bill will not affect the registry for restricted firearms like revolvers.

We all agree that something has to be done to fight against crime. But let’s do it with serious and efficient measures, not with symbolic and costly programs such as this registry. This registry unjustly targets hunters and farmers, not criminals.

I supported bill C-391 in the first two readings, as did all my colleagues in the Conservative Party. And I hope that the next time again, many of our colleagues on the opposition benches will join us to adopt it in the third reading.

Thank you for listening and talk to you soon.

Published on May 11, 2016

On January 21, 2010, I gave this speech on my vision of conservatism to members of the Calgary Centre Conservative Party Association who had invited me. This is the text of my speech, which you can also watch on these video clips. –MB

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Thank you very much Lee [Richardson – MP for Calgary Centre] for this very nice introduction.

Good morning everyone.

I’m very grateful to your riding associations for inviting me and to you all for being here today. I feel very privileged, as a Member of Parliament, to be able to discuss the matters and principles that unite us as conservatives.

As you may know, my journey in politics has been somewhat bumpy. But I very much enjoy my most recent role as an MP. It gives me more time to visit constituency associations and meet people like you. It also gives me more time to think about policy and even write and talk about it, which is impossible when you have very heavy responsibilities.

I started a blog almost a year ago, where you can see YouTube videos of me discussing monetary policy and various other topics. I believe I am the only MP in Ottawa who runs such a blog. All the others understand that it’s useless to try to compete with funny videos of cats and dogs and Hollywood celebrities!

Whatever you’ve read in the newspapers, the first thing you should know about me is that I am from the Beauce. The region along the Chaudière River south of Quebec City.

The Beauce is unique in Quebec. It is well known as the most entrepreneurial region of the province. This is where I learned the values that go with entrepreneurship: individual freedom, personal responsibility, integrity, and self-reliance.

Because I often talk about these values, some people in the media have described me as “the Albertan from Quebec”! This is a compliment, by the way. I wish the media was always this nice to me.

Of course, they are also universal values – values that are at the core of Western civilization and are shared by millions of Canadians. Values that have made this country prosperous and a great place to live.

And I believe you will agree with me – they very much are conservative values. Values that distinguish us from our political opponents.

When a problem arises, our opponents think that more government intervention is always the solution. As Ronald Reagan once said, these people tend to see the role of government in three steps: If it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidize it.

For us conservatives, on the contrary, government should ideally set up and enforce the basic rules of life in society. And then, leave individuals free to cooperate among themselves to provide for their wants. Government should not intervene to solve each and every problem on the road to a utopian and unrealistic vision of society.

To paraphrase John F. Kennedy, from a conservative perspective, don’t ask what your government can do for you; ask your government to get out of the way, so that you can be free to take responsibility for yourself, for your family, and for everyone else that you care about.

Good government policy gives individuals the opportunity to dream and to realize their dreams; it does not impose the dreams of some on everyone. I went into politics to defend this kind of policy.

Now, let’s face it, this perspective, based on freedom, personal responsibility and self-reliance, is not that fashionable nowadays.

Over the past hundred years, government has grown to gigantic proportions. It intervenes in almost every aspect of our lives. It tries to plan economic development. It tells us if we may or may not cut down a tree on our own property. It takes care of us from the cradle to the grave.

We got to a situation where every child that is born is already burdened with tens of thousands of dollars in debt. And if you take all levels of government into account, about half the wages of working people in this country goes to fund all this government intervention.

Why did this happen? Economists and political scientists who belong to a school of thought called “Public Choice” have tried to explain this dynamic. Their research shows how particular groups have a strong interest in getting organized to put pressure on politicians.

These special interest groups want subsidies, trade protection, more generous social programs, a fiscal or legal privilege, regulation that favours them and keeps out competition. Any favour they get from the government can potentially bring them huge benefits.

Of course, each of us will have to pay for it. But in our case, the amount we pay for each measure is not significant enough to justify getting organized to oppose it. You won’t go to meetings and demonstrate in the street to oppose a particular program that will cost you ten dollars. But the small group of people who get 100 million dollars have a huge interest in getting organized.

It’s very hard for politicians to say no to these lobbies. Because they have the means to hijack debates, quickly mobilize support and fuel controversies in the media. On the other hand, nobody hears what the silent majority has to say even if they are the ones paying the bill.

So, there is a fundamental imbalance in political debates. On one side, you have concentrated benefits to special interest groups who have a strong incentive to do their lobbying; on the other side, you have dispersed costs that fall on society at large.

That’s how government grows and grows. That’s how we become less and less free. And more and more dependent on government.

What should we, as conservatives, do to reverse this trend?

One way to change the terms of the debate would be to announce that the government is not going to grow anymore.

I know that we are going through some very difficult economic circumstances and that this is not a realistic proposal for the coming budget. But let’s try a thought experiment.

Last year, the federal government’s total expenses were about 250 billion dollars. You can do a lot of things with 250 billion dollars! From a historical perspective, it’s a gigantic amount of resources.

What if we decided that this is more than enough? That expenses are not going to grow anymore?

And I’m not saying zero growth adjusted for inflation and population or GDP increase. Just zero growth.

The overall budget is frozen at 250 billion. From now on, any government decision has to be taken within this budgetary constraint.

Every new government program, or increase in an existing program, has to be balanced by a decrease somewhere else.

We no longer have debates about how much more generous the government can be with this or that group, as if the money belonged to the government instead of taxpayers. The silent majority’s interests are always being protected.

The focus of the debate is shifting to a determination of priorities: what are the most important tasks for government to achieve with the money we have? Is this government function really important and should we have more of it? Then what should we do less or stop doing and leave in the hands of the free market, voluntary organisations and individual citizens?

That would be quite a change, don’t you think? A commitment to Zero Budget Growth could become a powerful symbol of fiscal conservatism, just like the “No Deficit” consensus was, to some extent, until the advent of the global economic crisis. But the consequences would be much deeper.

It would mean that every year, the relative size of government would be smaller. It would force politicians, bureaucrats, lobbyists and everybody else to stop thinking that your salaries are just there to grab for their own benefit. And because of the budgetary constraints, Canadians would have a lot more confidence that we’re not wasting their money.

We have to convince people that we’re not simply aiming to be better managers of a bigger government; we are aiming to be better managers of a smaller government.

There is a large constituency for these small-government principles. But because there are no lobbies to defend them, they get lost in the debates.

We have to act as the lobby of the silent majority. The silent majority who are tired of working to pay for special interests. The silent majority who are dismayed at seeing their freedom curtailed at every turn. The silent majority who are losing hope that life will get better for them and their children.

It is not always possible of course. There are political realities that cannot be overlooked. But being pragmatic is not enough. In the long run, there are political gains to be made by telling people the hard truth, and not just what they want to hear or what is politically correct.

And not just telling it; doing it too! We have to justify our actions on the basis of these principles.

When I was Industry minister, I was asked to support a new import tariff on bicycles. There was a big Canadian bicycle manufacturer that could not compete with bicycles made in Asia and threatened to lay off workers. So, in order to save over a hundred jobs, the solution was to force all those young Canadians buying a new bicycle to pay $67 more. That would have made all these Canadian families poorer, just to benefit a particular industry.

I said no. Even though the manufacturer was in my own riding, in the Beauce. The free market is not just an abstract concept that you mention when it is politically expedient, and that you forget when it is not. If you want people to believe you, you have to put your principles in practice.

I can tell you that people understood that in my riding. They respected my decision, because they knew why I had taken it. They could see that every time it was possible, I would defend the interest of the silent majority instead of particular interests. And in the long term, they would benefit more.

The confrontation between interest groups and the silent majority was again the central theme in what was by far the most important file I handled as a member of cabinet, telecommunications deregulation. Contrary to what you often hear, industry regulation rarely protects ordinary citizens. It usually protects some favoured players at the expense of others – and in particular at the expense of consumers.

Getting rid of obsolete and costly regulation in this crucial sector for our economy proved a lot more difficult than I thought. I had to face opposition from groups and businesses who benefitted from current rules. The strongest opposition came from my own civil servants at Industry Canada. Bureaucrats don’t like it when they lose their influence and their power to regulate.

It was quite a fight but in the end, we carried out what some observers consider the most important reform of the telecommunications sector in several decades. It brought more competition, more choices and lower prices for Canadian consumers.

As you know, politicians as a group are way down the list in terms of public confidence. I think one reason people are so cynical is that they do not believe us. They don’t perceive us as defending clear goals and principles. Or acting on these principles.

But if you are here this morning, it’s because you don’t share this cynicism. The reason you are involved in a political party is that you want to make a better world for yourself, your family, your community, for all Canadians. You believe it’s possible. And you’re looking for ways to make it happen.

I certainly would not be here today if I did not passionately believe in those ideals. Not after everything I went through two years ago. It would not be worth it.

So, I’m offering you a challenge.

Let’s restore public confidence in politics.

Let’s redouble our efforts to defend the principles of individual freedom, personal responsibility and smaller government.

I don’t think there is any other way to reach our goals. If we want conservative principles to win the battle, we have to defend them openly, with passion and with conviction.

And what could be wrong with giving a voice to the silent majority of Canadians who believe in these principles? After all, in “silent majority”, there’s the word “majority”!

Thank you!

Published on May 11, 2016

I made a presentation today on the theme of how to sell conservative ideas in Quebec at the annual conference of the Manning Centre for Building Democracy in Ottawa. Here is the original version of my presentation. — 12 March 2010

How to sell conservatism in Quebec
Maxime Bernier, MP for Beauce
Manning Networking Conference 2010
Ottawa, March 12, 2010

Good afternoon,

Thank you Michel for this very kind introduction. I would also like to thank Preston Manning for inviting me to this conference. Mr. Manning has done tremendous work to advance conservative ideas in this country. And this event is the perfect place for the topic I am about to discuss.

I would like to talk to you today about how to sell conservatism in Quebec. I’m happy to see so many people in this room who haven’t given up on that topic! It’s unfortunate, but many conservatives outside of Quebec seem to believe that conservatism in my home province is a lost cause. For them, all Quebecers are left-wingers and love big government. And it is hopeless to expect anything to come out of it.

If that were true, I guess I would not be here today. I won my riding with the largest majority of any candidate in Quebec in the last two elections. And everyone knows I’m a conservative!

I will grant you that Quebec has its peculiarities. One of these is of course the separatist versus federalist debate, which has tended to dominate all other issues for many decades now.

Another one is that Quebec intellectuals – the writers, artists, academics, journalists – have been more uniformly left-wing than in other societies since the Quiet Revolution in the 1960s. It’s been slowly changing in the past few years. But for a long time, it was not legitimate in polite circles to argue for smaller government. It was as if you were attacking Quebec’s identity.

For the past 50 years, the Quebec elites have been telling us that big government is not just good for the usual egalitarian and collectivist reasons that are popular elsewhere. It is also essential to protect Quebec’s identity. That’s a very potent mix. Nationalism reinforces big government, and big government reinforces nationalism.

By the way, there is a similar dynamic in the rest of the country. Canadian nationalism reinforces cultural protectionism, centralisation of powers and a big interventionist government in Ottawa. That’s the liberal and NDP vision of the country. But there is a more organized opposition to this vision in English Canada than in Quebec in the media and elsewhere.

It’s ironic that this is so today, because before the Quiet Revolution, French Canada was a very conservative society. It is common knowledge that it was conservative in a social and religious sense. But few people know or remember that it was also conservative in the sense that I’m using today, which is in terms of individual freedom, free markets and small government.

Quebec actually had one of the least interventionist governments in North America in the late 19th and early 20th century. It was then a very prosperous, fast-growing economy. It was not an underdeveloped and backward society, as many still believe. But rather one of the richest in the world, with a growing middle class. Montreal was the industrial and financial center of the country.

There was a strong political majority in favour of free markets and small government. The socialist and interventionist fads that swept the United States during the Great Depression, and English speaking Canada later, had very little appeal in Quebec at that time.

Now, the people who supported these small government principles did not suddenly disappear in 1960. But their intellectual and political legitimacy was swept away by a strong wave of nationalism and government interventionism. They have been in the political wilderness since then.

These principles are coming back in the political debates. One indication of this is the success of the Montreal Economic Institute, where I briefly worked as vice-president five years ago before going into politics. There is a lively community of libertarians on the Web in Quebec. Many individuals and groups who support these ideas are now being heard and becoming more mainstream.

Some people may reply that the failure of the Action démocratique du Québec – the ADQ – and its former leader Mario Dumont, is proof that Quebecers will not support a party that wants to shrink the size of government. I draw a different conclusion from this.

From the time it was launched more than fifteen years ago, the ADQ always had a rather confused program. It was autonomist most of the time, but during the 1995 referendum on independence, it supported the Yes side.

Also, it was never consistently in favour of smaller government. At some periods, it advocated cutting the size of bureaucracy, paying back the debt, implementing a flat income tax, and opening the health care system to private providers. My observation is that when it emphasized these issues, it usually grew in the polls and won a higher percentage of the vote.

At other times, it proposed more interventionist policies. Its platform advocated new welfare state programs to support families, bureaucratic planning of investments, and opposing tax cuts. It was hard to distinguish it from the other parties.

It suffered a crushing defeat at the last election, going from being the official opposition with 41 seats to only seven seats. A major reason is that 700,000 people who had voted for the ADQ previously did not find any good reason to vote for it this time. They did not vote for other parties either. Only 57% of Quebecers bothered to vote, the lowest participation rate in almost a century. I think these people were disaffected conservatives who concluded they had no political home.

It’s pretty clear to me that there is support in Quebec for free-market and small government principles, just as elsewhere. But this political niche has never been exploited in a consistent manner. There is also strong support for a decentralized federation. Decentralization is a conservative principle, but in Quebec of course, it also resonates for traditional nationalist reasons.

The host of this conference, Mr. Manning, founded a party over two decades ago that proposed exactly that: specific measures to decentralize the federation and reduce the size of the central government. As you know, it was very successful in the West. Our prime minister, and many of my colleagues in caucus, are former Reformers.

I had a chance recently to read the Reform Party Blue Book, which was the party program, and other documents from that time. There were remarkable proposals in there to address Canada’s public policy issues. Some of them would be considered very courageous today. Mr. Manning and Reformers were not afraid to question received wisdom and raise difficult issues. I very much like one quote from Mr. Manning that I found in the documents: “A dollar left in the hands of a consumer, investor, entrepreneur, or taxpayer is more productive than that same dollar in the hands of a bureaucrat, a lobbyist, or a politician.”

The Reform Party became the official opposition in 1997. But it never managed to make any inroad in Quebec. Many people who were attracted to its policies in Ontario and in the Atlantic provinces did not vote for it because they saw it as a regional western party that would never succeed in Quebec.

I did not follow it closely at the times and it’s hard for me to pinpoint exactly the source of the problems. But I can tell you one thing: almost all Quebecers believed at the time that this party was hostile towards Quebec and had nothing to offer them. Right or wrong, there was a perception that it was anti-French. They saw the Triple-E Senate proposal as a way to reduce Quebec’s influence to the level of PEI. They saw angry people railing against the excessive power of what they called “Central Canada” – Quebec and Ontario.

I have great respect and admiration for what Mr. Manning has done, but unfortunately, he never became fluent in French and could not speak directly to Quebecers to counter these negative perceptions. There were only a handful of supporters in Quebec, and no well-known public figure to explain how Reform policies could be advantageous to Quebec.

It’s unfortunate because I think Reform could have had a chance to become the governing party if it had de-emphasized these divisive aspects, and emphasized its small-government and decentralizing policies that could appeal to conservatives in all regions of the country. And if it had done so in both official languages.

Having good policies is not enough. You have to sell them in a way that takes into account Quebecers’ particularities and sensibilities. Or else you can easily be accused of negating Quebec’s specific character. Whether you like this or not, this has been part of Quebec’s political culture for two centuries, and it’s not going to change anytime soon. To sell conservative policies in Quebec, you have to take this into account.

It’s like commercial ad campaigns: very often, in order to sell the same product, they have a theme for the English-speaking parts of the country, and another one in French. Businesses find it necessary to have two different marketing strategies to effectively reach these different markets.

It’s obvious that all provinces are different in many ways. I certainly am not denying this. But only in Quebec is there a widespread feeling of belonging to a national community. A national community that is also a minority in Canada and a tiny minority on this continent. Our government recognized it with the adoption of the Quebec Nation resolution.

There are many in Quebec who don’t care about this and will never be open to consider the merits of conservative policies, whichever way they are being sold. Some want Quebec independence, period. They want a big government in Quebec City and no government in Ottawa.

Others are Trudeau liberals who think Canada will become more united if there is more centralization, more uniformity and top-down decision-making from the federal government. They want a big government in Ottawa.

Conservatives believe – or at any rate should believe, I think – in the principle of subsidiarity. This means that issues should be handled by the smallest or lowest competent authority, the one closest to the people. This way, each province, each region, each community, develops according to its own personality. This allows local particularities to be expressed. And it prevents conflicts. In this way, no big or influential region, or coalition of regions, can impose its will on others.

We know that in a large and diverse federation like Canada, the fastest way to breed resentment and disunity is to have a big central government intervening in local affairs. Separatism in Quebec, and discontent in the West, grew fastest during the Trudeau era, as a reaction against central government activism.

Jacques Parizeau used to say that he and Pierre Trudeau agreed on almost everything, except where to put the national capital. They were both believers in big government. Left-wing Quebec nationalism and left-wing Canadian centralism feed off each other.

We have nothing to offer these two groups. As Mr Manning used to say, conservatives offer a third way: a smaller, less interventionist government in Ottawa, restricted to its areas of jurisdiction. And there are many people in Quebec who are tired of the other two options and are yearning for such a third way.

Conservative policies don’t need to be watered down to appeal to a substantial portion of Quebec voters. On the contrary, as I said to a Calgary audience recently, I believe that to succeed, we have to be consistent, to defend our principles openly, with passion and with conviction.

What conservative principles need in Quebec is to be sold with a particular attention to Quebec’s specific political culture, just as they are tailored to be attractive to an English-speaking audience. They have to be crafted as a way to solve the problems of all of Canada, including Quebec, and not as a reaction from one region against another. If we succeed in doing this, conservatism has a brilliant future in this country.

Thank you.

Published on May 11, 2016

I delivered a speech today in Mont St-Grégoire (south east of Montreal), before members of several conservative riding associations of the Montérégie region who had invited me, on my vision of Quebec and federalism. Here is an English version of the original French.
— 16 April 2010

For a proud, responsible and autonomous Quebec
Maxime Bernier
Speech delivered before members of Conservative Party of Canada riding associations of the Montérégie
Mont St-Grégoire, April 16, 2010

(Words of thanks)

I would like to discuss with you today the future of our society, the future of Quebec, which worries me very much.

Political debates in Quebec have been dominated for several decades by the “national question.” It’s a legitimate debate, but a debate that’s not going anywhere and will probably not go anywhere for a long time to come. Lucien Bouchard said it recently, and polls also show it: most Quebecers do not believe that Quebec will separate from Canada in the foreseeable future.

Despite this, since the 1970s, we’ve talked a lot about political independence, about the constitution, we’ve held referendums. And meanwhile, we’ve built a system of economic dependence that’s become more and more elaborate.

Quebec has one of the biggest and most interventionist governments in North America, and one of the heaviest fiscal burdens. Quebec has the most far-reaching social programs. Quebec is the province that gives the most subsidies to businesses, artists, parents, and to a host of other groups. And let’s not forget the other problems, such as the fact that Quebec is among the most rapidly aging societies in the world. This will increase the cost of social programs, and there will be fewer young people to pay for them.

Some weeks ago, we learned in a study of the Quebec department of Finance that we rank fifth among the most indebted societies in the industrialized world, not far behind Greece which is currently going through a difficult financial crisis. While we were debating independence, we accumulated an enormous debt and we became dependent on borrowed money to fund an unsustainable level of public services.

We certainly have many reasons to be proud of our culture, our language, of the evolution of our society during the past four centuries. But the political choices that were made in Quebec in the past four decades have led us in a dead end. If we do not change direction soon, we’re going to hit a brick wall.

As it happens, the Bloc Québécois was recently celebrating its 20^th anniversary. Instead of discussing the real problems of Quebec, the bloquistes prefer to continue debating a hypothetical project and try to prove that our federal system is not working.

Gilles Duceppe made a fool of himself by comparing the separatist movement to the resistance against the Nazis in his anniversary speech. If the bloquistes spent more of their energy trying to find solutions to the concrete challenges that we face instead of uttering such nonsense, perhaps we’d be in better shape as a society.

Mr Duceppe also complained, as he has been doing for 20 years, that Quebec did not get enough money from the federal government. He said that our last budget did not redistribute enough funds to Quebec, and that is the proof that federalism is not profitable for us. So in short, Mr Duceppe, who is fighting for Quebec independence, laments the fact that Quebec is not enough economically dependent on the rest of Canada. He wants Quebec to get more money, he wants us to be even more dependent!

This year, Quebec will get $8.5 billion in equalization payments, an increase of $200 million compared with last year. That’s more than half of the $14 billion in the program. That’s money that comes from the richer provinces, such as Alberta, British Columbia and Saskatchewan.

It’s true that other provinces, such as Manitoba and the three Maritime Provinces, get even more equalization money per capita than Quebec, and so are even more dependent on Ottawa. But that’s not an excuse. As a Quebecer, I am not really proud of the fact that we are a poor province that gets equalization money.

And if we are poorer, it’s not the rest of Canada’s fault. It should be obvious enough that unbridled state interventionism does not lead to prosperity. If that were the case, Quebec would be the richest place in North America instead of being one of the poorest.

Many studies have shown that the less its government intervenes in the economy, the more prosperous a society becomes. The Fraser Institute regularly compares the economic situation in the provinces and states of North America and has found a direct correlation between the level of economic freedom and prosperity. An analysis of 23 OECD countries over a period of 36 years has also shown that economic growth is inversely proportional with government spending. For every additional ten percentage points of government spending as a proportion of GDP, economic growth is permanently reduced by one percent a year.

So, to repeat, the rest of Canada has nothing to do with the fact that we are poorer, as the bloquistes claim. We are poorer because of bad economic policies that made Quebec’s economy less productive; we are poorer because we live beyond our means instead of having responsible policies; we are poorer because the first reflex of much of our political class is to constantly beg for more money in Ottawa instead of taking the necessary decisions that would solve our problems and put our house in order.

In the 1970s, Robert Bourassa invented the term “profitable federalism” (“fédéralisme rentable”). That was a very unfortunate concept to put forward as a way to defend the merits of federalism. For many Quebecers, the more money we extract from the rest of Canada, the more profitable federalism is deemed to be.

Both federalist and separatist provincial governments have used the threat of separation to try to get more money. Can you remember the Bélanger-Campeau commission? The whole debate about the fiscal disequilibrium? It’s always the same pattern, the same beggar-thy-neighbour approach. Even when the amounts being sent by Ottawa increase, the reaction in Quebec City is always that it’s not enough, we need more, or else this is the proof that federalism is not profitable.

For my part, the type of federalism that I wish for is not a profitable one, it’s responsible federalism. On the masthead of my blog, there are two words in large characters, two inseparable principles that I consider extremely important: liberty and responsibility. I favour as much individual freedom as possible. But when you are free, you must also be responsible for your actions. You can enjoy the fruits of your labour, but you must also bear the consequences of your bad decisions.

The same is true for governments. A responsible federalism is a federalism that rests on the principle of subsidiarity. This means that issues should be handled by the smallest or lowest competent authority, the one closest to the people. Each one should fund its own programs and decide for itself its own priorities as an autonomous entity.

This way, each province, each region, each community, develops according to its own personality. This allows local particularities to be expressed. And each is responsible for its own policies. If one has bad policies, others cannot be held responsible and should not be forced to help pay the bill.

In a large and diverse federation like Canada, the fastest way to breed resentment and disunity is to have a big central government intervening in local affairs. Separatism in Quebec, and discontent in the West, grew fastest during the Trudeau era, as a reaction against central government activism.

We, conservatives, offer a different vision: a smaller and less interventionist government in Ottawa. The intention of the fathers of Confederation was clear: it was to have autonomous provinces, each one responsible and completely independent in their own jurisdiction.

Even if the Bloc only cares about criticizing, we are solving real problems in Ottawa. For example, our government cut the GST by two percentage points, which allowed Quebec to take up this fiscal space. As a taxpayer, I would have preferred no increase in my tax burden and that the Quebec government find other solutions to its financial problems. But this is an illustration of the flexibility of our federation. Provinces are free to decide their own fiscal policies.

Our government is also going ahead with its plan to reduce corporate taxes so that our economy becomes more competitive. Our government also adopted prudent policies to deal with the economic crisis and Canada is one of the countries that suffered the least from it. All of this helps Quebec and Quebecers.

Let’s be frank: many people in the rest of the country perceive Quebecers as a bunch of spoiled children who are never satisfied and always ask for more.

This perception has some basis in reality. It derives from 40 years of futile debates over independence; 40 years of irresponsible policies adopted by one provincial government after the other living beyond their means and getting us deeper into debt; 40 years of demands to extract yet more money from the pockets of our fellow citizens in the rest of Canada.

We have to get out of this false choice between independence and profitable federalism. We also need to put an end to policies that lead to our impoverishment and to stop expecting the rest of Canada to bail us out with more equalization money.

We are members of a political party at the federal level. As Canadian conservatives, there is obviously nothing we can do to solve the problems of the Quebec government. But we can contribute, in our own way, to changing the terms of the debate. We can shift political debates in Quebec to another paradigm. We can point to other solutions.

Imagine if, instead of exerting ourselves to get more money from the rest of Canada, we aimed at something more positive: to become sufficiently rich that we’re not on the receiving end of the equalization program anymore. Would we not be prouder as Quebecers if this happened?

Imagine if, instead of pointlessly debating the merits of political independence, we tried instead to live within our means and to get out of our economic dependence.

Imagine if, instead of having the bloquistes always trying to impede our progress within Canada, we had a group of conservative MPs teaming up with all those who, across this country, want a more decentralized federalism.

That’s the alternative that we have to offer Quebecers. The vision of a proud, responsible and autonomous Quebec. Thank you.

Published on May 11, 2016

In my last video message on monetary issues in January, I ended by saying that I would talk about the Bank of Canada’s inflation target in the next one. For all kinds of reasons, including the many speeches that I gave in the meantime, I was not able to do it. However, this is the topic I discuss in a speech delivered at the Economic Club in Toronto this morning.  — 8 June 2010

Inflation, the Underrated Destroyer of Prosperity
June 8, 2010
The Economic Club, Toronto
Maxime Bernier, MP for Beauce

(Words of thanks)

Monetary policy is one of the most difficult topics in economics. But also, I believe, a topic of absolutely crucial importance for our prosperity.

As you all know, last week, the Bank of Canada increased its benchmark rate by a quarter of a percentage point to 0.5%. There had been a lot of speculation in recent weeks about that decision to finally raise rates after keeping them at a record low for more than a year. And as usual there will be a lot of speculation about the bank’s next moves. How far will it go? How fast?

All this guessing about setting rates has nothing to do with capitalism and free markets; it has more to do with central planning and government control of the money supply. In a monetary free market, the interest rate would be determined by the demand for credit and the supply of savings, just like any other price in the economy.

Government control over money has serious consequences that few people seem to be aware of.

One of them is that central banks are continually increasing the quantity of money that is circulating in the economy. In Canada for example, if we use the strictest definition of money supply, it has increased by 6 to 14% annually during the past dozen years. The situation is about the same everywhere.

The effects of constantly creating new money out of thin air have been a debasement of our money and a dramatic increase in prices. The reason why overall prices go up is not because businesses are greedy, or because wages go up, or because the price of oil goes up. Ultimately, only the central bank is responsible for creating the conditions for prices to rise by printing more and more money.

The Bank of Canada has had an inflation rate target of 2% for more than 15 years. A price inflation rate of 2% a year may seem small. But when you add up 2% of depreciation of the monetary unit year after year, you end up with large numbers. Total inflation in Canada from 1990 to today adds up to 45%. This means that your dollar can now buy the equivalent of less than 70 cents if you compare it to 20 years ago.

As even the Federal Reserve chairman Ben Bernanke admitted, inflation is the equivalent of a tax. The most insidious of all taxes, which bears hardest on those least able to bear it. It eats away at our purchasing power, our revenues and our savings.

It is true that most of us get salary increases that compensate for the loss of purchasing power. But all those whose income doesn’t increase as fast as prices get poorer.

Many interest groups, including governments, like cheap credit. There is an inherent bias in monetary policy in favour of lower interest rates. But this too has unwelcome consequences.

One of them is that people are encouraged to save less, because the returns on savings are lower. And they are led to carry more debt, because credit is easier to obtain.

This is precisely what we have been doing in Canada, in the U. S. and elsewhere in the world for the past 20 years. In 1990, the ratio of total debt to disposable income for Canadian families was 90%. Today, this ratio has gone up to 144%, an all-time high.

It seems that debt has become a way of life. Thankfully, public debt in Canada is at a reasonable level. But as we are seeing around the world, many countries such as Greece are now on the brink of bankruptcy because they became too dependent on cheap money.

Monetary inflation creates all kinds of market distortions and is also the cause of the booms and busts that our economy has been going through.

The pattern is becoming sufficiently clear that these are not an inherent failure of the capitalist system as many people believe. They are rather caused by central bank policies, as economists such as Nobel Prize winner Friedrich Hayek explained long ago.

Remember: we had the dotcom bubble at the end of the 1990s. When that crashed, Alan Greenspan flooded markets with money. Between 2001 and 2004, the Federal Reserve pushed down interest rates to as low as 1%.

If you factor in the level of inflation, real interest rates were actually negative. This is the same as subsidizing people to encourage them to take loans. But we all know this lesson: you cannot live on a credit card for very long!

We then got another bubble, which was made bigger by the policies of the U. S. government. It encouraged banks to extend risky mortgages to insolvent borrowers; and it encouraged people to take up these mortgages and buy houses that they could not really afford.

You’ve heard the rest of the story. These mortgage loans were securitized and then sold on the market around the world. And the financial institutions that had bought them got into trouble when home owners started to default and home prices went down.

In 2007, that real estate bubble too began to burst. And since then, central banks have once again sent interest rates down to almost 0%. This means that real interest rates are again negative, since price inflation is higher than that. Central banks have flooded the financial markets with money and allowed governments to pile up gigantic amounts of debt to prevent a recession.

It is true that economic growth seems to be back. But how sustainable is it? How will governments and households reimburse all this debt, unless they cut back on spending? Will some countries decide to monetize their debt and thereby provoke high inflation? Have we created more bubbles in new sectors that will bring another global recession down the road when they burst? If this happens, what kind of stimulus policies will we be able to adopt if we are drowning in debt?

Despite all these negative effects of inflation, most economists and commentators seem to think that a little inflation is a good thing. And they tell us that deflation, or a fall in prices, would be a disaster for the economy. But that’s not true.

Let’s start with common sense and what’s happening in our daily lives. Do you, as consumers, prefer to buy stuff that is cheaper or more expensive? I think we all know the answer to that!

We are all consumers, and we all benefit when prices go down. If we pay less for one good, it means we have some money left to buy other goods.

Economic activity does not stop. It simply means we can buy more with the same amount of dollars. And more purchasing power means a higher standard of living for everyone.

In fact, there is nothing mysterious about the effects of lower prices. Think about computers. Fifteen years ago, they were big, not very powerful, had few gadgets, and cost a lot more than today. Prices in the computer business have been going down all the time since then.

Have people stopped buying computers or waited years before buying a new one to benefit from even lower prices? Absolutely not. On the contrary, more computers are being sold as their prices go down.

Imagine a situation where central banks don’t manipulate the money supply anymore. And instead of continually rising at a rate of between 6 and 14% per year, as we’ve seen in Canada in recent years, the quantity of money in the economy remains stable.

Every year however, we become a little bit more productive. We create new goods and services. We find new methods to produce them more efficiently. Technology gets better. And if there is population growth, there are also more people working.

So there are always more and more goods and services available in the economy, but we have the same quantity of money to buy them. Prices will obviously have to adjust by going down. If the economy grows, let’s say, by 3% a year, while the money supply grows by 0%, then we will necessarily get price deflation.

Note that in this context, businesses are still able to make profits, because their costs also go down.

This is not just theory. It is what happened several times in the 19th century, in an era of rapid economic development. At a time when there were no central banks and when money was calculated as a certain quantity of gold or silver.

Deflation is not a threat to our prosperity. On the contrary, in a situation where the money supply is stable, it is the manifestation of prosperity!

Prosperity has nothing to do with the quantity of money that we have in our pockets, but rather with the quantity of goods that we can buy. And if we can buy more goods with the same amount of money because prices are lower, then we are more prosperous.

This is why there is no reason to fear a drop in prices. And why the interventions by central banks to prevent prices from going down causes more harm than good to the economy.

Now, given all this, what should we do? I believe that within a few years, we will need to hold a serious debate about returning to the gold standard.

Until then however, there are more immediate measures to discuss, such as the inflation target of the Bank of Canada. The agreement on the price inflation target between the Bank and the minister of Finance is set for five years and has to be renewed next year, in 2011. The Bank is studying different alternatives to the current 2% target.

I’m very happy that the Bank has already rejected a suggestion made in a report by the International Monetary Fund last winter, to increase the target rate to 4%. The IMF logic is entirely based on the idea that central banks should have more flexibility in trying to manipulate interest rates and the amount of money in circulation. According to this view, higher inflation and borrowing costs at the outset of a crisis would allow central banks to slash interest rates more aggressively and keep them at lower levels longer if needed to encourage spending.

That’s like trying to cure a drug addict with larger drug injections. The problem is precisely that there is already too much inflation and too much manipulation of the money by central banks. The solution has to be to reduce them, not increase them.

Another one of the proposed alternatives is to target a price level over a longer period instead of an inflation rate every year. This means that if one year for example, the inflation rate is 1%, then the next year the Bank would try to increase prices by 3%, instead of trying to simply go back to its goal of 2%. It would target an average rate of inflation over time and compensate for past deviations by deviations in the opposite direction.

Let me rephrase this differently from my own perspective. The inflation rate was only 1% last year. We should have debased the currency by 2% to reach our targeted price level. So this year, let’s create even more money out of thin air so that it loses 3% of its value. This will compensate for last year’s insufficient debasement of our dollar.

Sounds absurd? I think it is too.

If we have to have an inflation target, I believe the best and most realistic alternative at this point would be to set it at 0%. It is true that this would diminish the ability of the Bank of Canada to artificially stimulate the economy. There could not be negative real interest rates as we have now, since the Bank’s official interest rate cannot go below 0%. But as I said, I think that too much monetary manipulation is the problem, not the solution.

The Bank would need to have a much more prudent and sound monetary policy to keep price inflation at 0%. That would really preserve our purchasing power. That would help prevent the cycles of booms and busts that we have experienced. It would reduce the price distortions that inflation causes throughout the economy. It would facilitate the financial planning of individuals and businesses and increase the efficiency of our economy.

Last August, the governor of the Bank of Canada Mr. Mark Carney said: “The single most direct contribution that monetary policy can make to sound economic performance is to provide our citizens with confidence that their money will retain its purchasing power.”

A 0% inflation target would achieve precisely this and send a powerful message that inflation in itself is wrong. That debasing the currency may bring some short-term gain but always brings long-term pain.

This would be a big step in the right direction.

I may be a dreamer, but I think monetary economics should be a hot topic! The current review of the Bank’s inflation target is a great time to have this kind of debate. I hope that more Canadians will become interested in in how the inflation rate target affects our purchasing power, our standard of living and therefore our life.

Thank you.