Seaways and Separatism

Like every Canadian my age, I was taught about the St Lawrence Seaway in school. But I never fully understood why it was built or how it worked. So, while in Montréal this past weekend, I decided to cycle the length of the Lachine Canal, and around to the Lachine Rapids (pictured on the right), to see things for myself.

Canada's geography explains Canada's history, and my weekend cycle trip made lots of things make sense. Montréal is where it is because no sailing boat could ever make it up the Lachine rapids. The St Lawrence Seaway was built because no tanker could ever make it over those rapids, and the existing canals were too small. 

As I explored the Lachine Canal, I noticed something odd. The St Lawrence Seaway opened in 1959. That coincides almost exactly with the start of Quebec's Quiet Revolution, the movement that transformed Québec into a modern, secular society. Within two decades of the Seaway's opening, Québec had a separatist government, and was on the verge of holding a referendum on independence. Could there possibly be a connection between seaways and sovereignty? 

The Great Lakes - Seaway web site has a wealth of data on traffic patterns. Plotting the gross tonnage over time it is immediately obvious to anyone with any knowledge of Québec politics that seaways and separatism are correlated.

 
Quebec elected Parti Québécois governments in 1976, 1981, 1994 and 1998. The all-time peak of St Lawrence Seaway traffic coincides just about perfectly with the all-time peak of separatist sentiment: the 1980 referendum. The PQ left office in 1985, and again in 2003, each time as seaway traffic was falling. If I code the years in which the Parti Québécois was in power for all or part of the year as "1", and other years as "0", I find that seaway traffic explains 10 percent of the variation in Québec governments.

I can tell a superficially plausible story about why the building of the St Lawerence Seaway might have led to rising separatist sentiment in Québec. Prior to the Seaway, two types of boats were used for shipping goods through the Great Lakes system. From Montréal to Toronto and throughout the Great Lakes, goods were shipped in small freighters called "lakers". These boats were specifically tailored for the Lachine and other canals, built to the maximum dimensions the canals would accommodate. Down river from Montréal, large, ocean-going vessels were used. All goods had to be transferred from one type of craft to the other in Montréal.

There were alternative transportation routes, for example, by train to Halifax, or, in the summer months, to Churchill, Manitoba. But energy-efficiency made shipping an attractive means of transport.

The building of the St Lawrence Seaway eliminated of the need to transfer cargo from lakers to ocean-going vessels in Montréal, allowing other ports, such as Toronto and Hamilton, to compete with Montréal for the opportunity to load ocean-bound freighters. The Seaway also -- in theory -- lowered transportation costs for firms located upstream. Prior to the Seaway, a firm manufacturing goods in Ontario had to transfer the cargo onto a sea-going vessel in Montréal or Halifax. The Seaway couldn't entirely eliminate transportation cost differentials - Toronto is further from Europe than Montréal is, and the Seaway's toll charges were non-trivial - but it provided upstream firms with a broader range of transportation choices.

According to my theory, the Seaway led to separatism by causing a decline in the economic importance of Montréal, causing dislocated workers to flock to the Parti Québécois. It also shaped the reaction of the rest of Canada to the separatist movement: if Montréal was no longer a pivotal transportation hub - and if the Seaway was governed by an international agreement, meaning Québec could not shut off the rest of Canada's access to the Atlantic - a separate Québec was not an existential threat to the rest of Canada.

There's only one problem with this theory: there's not one shred of evidence to support it. Sure, the industry around the Lachine Canal declined after the Seaway was built. But during the 1960s and 70s firms shut down in older industrial areas across the country. Overall, Québec prospered in the years after the Seaway opened, as the province developed its hydroelectric resources. Montréal continued to be an important port, becoming Canada's first container port in 1968. I couldn't find any scholarly studies arguing that the St Lawrence Seaway had a negative economic impact on Québec (or any studies addressing the question at all - though perhaps there is some literature written on the subject in French.)

Perhaps, then, the causality runs the other way, from separatism to use of the Seaway, as English-speakers left Québec and moved upstream after the introduction of Bill 101? Plausible, but again: there is no evidence whatsoever that this is the case.

The best study I could find of the history of the St Lawrence Seaway is Ronald Stagg's The Golden Dream. After taking a look at his book, this is how I would explain the correlation between seaways and separatism.

The growth in shipping volume along the Seaway coincides with Québec's Quiet Revolution because they had similar root causes. Both are products of economic development, demographic transition and the prosperity that North America and Europe experienced during the 1950s and 60s. 

The decline of shipping volume since the 1980s reflects a number of factors. The importance of Atlantic trade, relative to Pacific trade, has decreased. North America's steel industry, which was a major user of the Seaway, has been in decline. The Mississippi offers a toll-free and thus cheaper alternative to the Seaway for much American shipping traffic. Indeed, as Ronald Stagg explains in The Golden Dream, the relative subsidies given to various types of transportation - shipping, trail, trucking - as well as the subsidies available for various types of ports and ship building - have rarely worked in favour of the St Lawrence Seaway, so it has never been as popular as its proponents hoped.

Finally, container shipping has made the Seaway obsolete, as it is too small to accommodate today's huge container freighters. It is cheaper to truck goods to Montreal or Halifax and load them directly onto a serious-sized vessel.

The Seaway is getting old. It lacks the optimism and vigor of youth, and has been left behind by the forces of globalization. In the same way, globalization and population aging - as well as the accommodation of Quebec's aspirations within Canada - have taken the edge off separatist feeling. It is not that seaways cause separatism (or vice versa). Rather both have experienced decline at the same time because they have been subject to similar pressures.

I learned three things from thinking about seaways and separatism.

The first is that - given the hundreds of academic economists working in Canadian universities - Canadian economic history receives remarkably little attention. Is no one interested in the history of Canada's transportation network?

The second is that economists don't do enough to learn from their mistakes. Economists carry out cost-benefit analyses and other impact before projects are implemented. (We get paid to do that.) But we rarely go back and see whether or not our assessments of the situation were actually correct. (We don't get paid to do that.) In the case of the St Lawrence Seaway, traffic and toll revenue forecasts were seriously off. But by failing to assess what went wrong, economists don't learn how to do things better. Oddly enough, the St Lawrence Seaway has a remarkable number of parallels with the Rideau Canal megaproject a century earlier: high cost, magnificent engineering, and rapid obsolesence. 

The third take-away? Don't believe everything you learn in elementary school.

Comments

[Patrick]

I can think of some other possibilities to explain the decline in seaway shipping: the price of gasoline (making trucking more attractive), and China (send the plastic salad shooters to LA or San Diego and stick 'em on a truck).

Not sure I buy the disaffected workers story. Separatism wasn't ever as big in Montreal as it was in say Lac St. Jean or Quebec City. In general, Montreal has been in slow decline for many years. As you say, the city is where it is because of physical geography: the end of navigable water and good farmland nearby. In the post war era French Canadian workers commanded lower wages, so manufacturing setup shop. There was a big rag trade (now gone completely). It also helped having NY and Boston just down the road (once there was a road). Over time, these and other advantages have declined in importance. The world shifted West. It looked like they might get a reprieve when shale gas was discovered, but people aren't keen on fraking (understandable) and the Gov't shut 'er down.

As energy (well, liquid fuels in particular) become more and more expensive and globalization unwinds I think Montreal will have a renaissance, but who knows how long that will take? Could be 5 years, could be 50.

[Livio Di Matteo]

Frances:
Very interesting post. Montreal and its merchants throughout Canadian economic history have long been associated with attempts to create an "Empire of the St. Lawrence" (see Donald Creighton) along the transportation route of the Great Lakes-St. Lawrence watershed. However, its natural competitor as an entrepot for North America in the long run was New York. As for the decline in shipping since the 1980s, Thunder Bay, the Canadian western port terminus on the Seaway, used to be the largest grain port in the world even prior to the Seaway. After the seaway opened in 1959, grain shipments continued to rise at first but then also peaked in the early 1980s and have since also declined as a result of shifts in world grain markets and transportation routes. One could argue that another reason the Seaway did not do more for Montreal and the ports of the Seaway is that by the time it was built it was already built too small to accommodate the new generation of larger ocean-going ships and the container revolution. Politics and lobbying may have played a role as in the 1950s a larger Seaway with locks large enough to accommodate the new generation of ocean-going ships would have provided more competition for the railways.

[Becky Hargrove]

"But we rarely go back and see whether or not our assessments of the situation were actually correct. (We don't get paid to do that.)"

Odd, isn't it, to think that the maintenance of what we create/build with monetary value has a higher priority than the value of understanding what we actually create. Which is another reason I believe the measurement of lateral skills/knowledge exchange could return a wealth of wisdom to economic thought. I have a pet theory that economic activities consist of this progressive order: maintenance, building, creating, healing and understanding. Most of monetary activity gets generated in building.

[Frances Woolley]

Livio "shifts in world grain markets"

In particular the creation of the EC and then the EU shifting the trade orientation of the UK away from former colonies and towards Europe, European agricultural subsidies, and the 1980 Soviet Grain embargo (I don't know how much that affected Canadian wheat exports, but certainly it's true that there's a sharp decline around 1980, and it's also true that the St Lawrence is typically used for bulk cargos like wheat and especially heavy bulk cargos like iron ore rather than anything that's shipped in a container.

The role of politics and lobbying is fascinating. The St Lawrence Seaway was banned from advertising, for example, as a result of provisions put into the legislation by the railway lobby, and boats built for the lakes couldn't benefit from special subsidies for the construction of salt-water vessels. (The Golden Dream has some details on this). There's a whole thesis to be written on lobbying and transport costs.

Patrick: "Not sure I buy the disaffected workers story." If it's right there should be strong separatist sentiment in the Verdun and LaSalle areas of Montreal, which is where a lot of the affected workers would be located. I looked to see if I could find anything on that, but wasn't successful.

So I'm not sure if I buy it either.

[Phil Koop]

"The first is that - given the hundreds of academic economists working in Canadian universities - Canadian economic history receives remarkably little attention. Is no one interested in the history of Canada's transportation network?"

Maybe there is work on other parts of the network. What's the story for the Welland Canal, which saw four versions in its first century of existence, whereupon we realized there was no need to execute the (planned) fifth version in the subsequent eighty?

[Sina Motamedi]

Great post.

[Stephen Gordon]

Frances: I just asked Gérard Bélanger (he teaches our course on the Quebec economy) about the Seaway, and his immediate response was exactly what you conjecture: it marked the start of the independence movement.

As far as the economics goes, the actual economic loss to Montréal was fairly minor: taking things off one boat and putting them on another is a marginal activity. And another thing to consider is that the Seaway made it possible to ship iron ore from Sept-Îles to Hamilton and points further west, so the effect on Quebec as a whole isn`t obvious one way or another.

[Patrick]

I wonder if it was the prospect of more interconnections with the outside - mostly English - world that spooked people?

[Frances Woolley]

Sina - thank you!

Phil: "What's the story for the Welland Canal, which saw four versions in its first century of existence, whereupon we realized there was no need to execute the (planned) fifth version in the subsequent eighty?"

There were many studies in its first century of its existence, then we realized there was no need to study these things ;-)

Seriously, these are the top hits for "Welland canal economics" in google scholar:

The Welland Canal Company: A Study in Canadian Enterprise
HGJ Aitken - 1954 - Harvard University Press

Canadian transportation economics
AW Currie - 1967 - University of Toronto press

Economics of Canadian transportation
AW Currie - 1959 - University of Toronto Press
Cited by 23 - Related articles - Find in AMICUS - All 2 versions

An economic history of Canada
MQ Innis - 1954 - Ryerson press

The role of capital in Canadian economic development before 1875
HC Pentland - … Canadian Journal of Economics and Political Science/ …, 1950 - JSTOR

The entrepreneur in economic history
JH Soltow - The American Economic Review, 1968 - JSTOR

I did find one post-1970 book on the history of the Welland canal, but it's more a local/engineering history:

http://www.amazon.com/Welland-Canals-their-Communities-Transformation/dp/0802009336/ref=sr_1_1?ie=UTF8&qid=1321631869&sr=8-1

Then you start finding articles like "Untested assumptions: the role of canals in the dispersal of sea lamprey, alewife, and other fishes in the eastern United States"

[Frances Woolley]

Stephen: "I just asked Gérard Bélanger (he teaches our course on the Quebec economy) about the Seaway, and his immediate response was exactly what you conjecture: it marked the start of the independence movement."

Why? That I don't understand. Because as Livio has pointed out, the Seaway is particularly useful for shipping heavy bulk cargo, so should have helped with the development of Quebec's iron ore resources.

[Guillaume]

The Seaway has long been a strategic target for some separatists, going back to the 1960s, with a failed FLQ bomb plot in the locks. I think a radical once said that sinking a ship in the Seaway should be the first thing done after independence. Haven't heard the argument against the seaway in years, probably for the reasons stated by Frances.

As for the relative decline of Montréal, it's important to note that it actually goes back to the 1950s, contrary to the popular myth that it was all Lévesque's fault. Anglo flight is a real phenomenon, but it probably has more to do with labour mobility than language laws: the job market was simply much better in Ontario for decades.

Francophones are much less mobile for obvious reasons and this probably accentuated the labour market's downwards cycle, much like that of some small European nations now.

A correction: it's simply untrue to say that separatism is weaker in Montréal. It was and remains the center of the movement, at least in the French part of town. In aggregate, including the Anglo West, it is of course much weaker than the rest of the province. But Francos in Montréal are much more likely to be separatist than Francos in Québec city. It's simply that Montréal is where the fault line is.

That being said, I'm moderately optimistic about Montréal's prospects. It's a nice place to live, the cost of living relatively low and hosts 4 gigantic universities : it looks like a good hub for the knowledge economy.

[Jacques René Giguère]

Frances: Extremely interesting post, on par for this blog. Except for the link with separatism which belong in the editorial pages of The Montreal Gazette or the Globe & Mail...
I must go to class and then to the airport ( to MTL of all places).
This professor of Quebec economic history will try to post this evening.

[Frances Woolley]

Guillaume - Was it the loss of sovereignty that angered the separatists? Because there's clearly a difference in the governance structure of the St Lawrence Seaway (international commission) as opposed to the Lachine Canal. These things are not always easy for Anglos to find out.

"It's a nice place to live" - and a nice place to visit, too. And I agree that there is still some (perhaps isolated) separatist sentiment in Montreal - e.g. the film at the Musee Pointe-à-Callière has definite separatist undertones. But that's o.k. - I understand why some Quebecois would want to build their own nation.

Jacques Rene - will look forward to your comments.

[Nick Rowe]

Here, I think, is a photo of the first ever St Lawrence Seaway:

http://www.flickr.com/photos/alain_quevillon/3872456896/

It's a "rigolet", without locks. I don't think there's an English translation. And I think it's an unfamiliar word to francophones too.

[Tim]

One thing that hasn't been mentioned is that the Federal Govt made Montreal a year round port a few years after the seaway opened which to some degree should have negated some of the negative impacts to the city from the Seaway. I do know that it is well known that the opening of the Seaway and making Montreal a year round port devasted several of the smaller ports in New England such as Portland, Providence, and even Boston. However despite the obvious benefits to Montreal the city may have been a net basis may have been hurt. Historically Montreal was as much a railroad interchange point as port. In fact two of the earlier engineering acheivement of the city were the railroad bridges at LaSalle and Pointe Victoria which allowed railroad traffic to flow across the St Lawrence thus allowed freight to flow between Ontario and the West on one hand and Atlantic Canada and New England. Many of smaller regional railroads in New England such as the Boston & Maine, Maine Central, New Haven etc all used the CN and CP as alternatives to route around the New York Central and Pennsylvania Railroad which monopolized a lot of the rail routes between the Northeast US and Midwest. Once the winter port traffic from Portland to Montreal dissappeared though the cost of maintaining fairly high cost rail infrastructure between Southern NE and Montreal such as the Crawford Notch Line through the White Mountains had to be spread out among a lot fewer users in paper/pulp for example and basically became completely uneconomical.
Now to be fair just in the railroad industry alone there was huge degree of turbulence going on so I don't think one event such the Seaway can be "blamed." A lot of traditional industry in Quebec(on the South Shore especially) and New England such as textiles and paper/pulp was dissappeaing quite quickly however I do think it is interesting to study the micro economic factors behind these changes.

[Andrew F]

Great read, Frances. Thanks!

[Determinant]

There are good stories to be told just in changing markets and the Seaway without separatism, as Patrick and Tim allude.

First, much of the Prairie Grain Trade now flows West to Vancouver and then to Asia whereas before 1970 it flowed East. This is due to the increased prosperity and population in those countries and the Wheat Board's successful attempts to capitalize on that.

Also Britain entered the EU and erected tariffs against Canadian grain. Also the Chorleywood Bread Process was invented in the 1950's. Domestic British grain is too low in gluten to be useful in traditional bread processes but the industrial high-speed mixing in the CWB gets around that. Thus the British could use cheaper domestic wheat instead of importing Canadian wheat. I'm a hobby baker.

Third Alberta oil came online in the 1950's and 1960's. The National Oil Policy said that Ontario would use Alberta oil, not Venezuelan imports as the East does. That's where the Irving Refinery in Saint John gets their input stock. So no need for tankers to go beyond Montreal

Though the container revolution may be bad for the Seaway, it was great for Montreal. Containers are wonderful for railways and Montreal simply reaffirmed its role as the chief railhead of eastern Canada, particularly as CP terminates there for practical purposes. With containers and truck trailers on flatcars the railways became much more economical than long-haul trucking and canals.

I have seen companies told by their trucking firm that long-haul with containers or trailers on railway flatcars is the best rate that can be had.

Even the steel industry has transitioned. Dofasco has an electric-arc furnace that uses scrap steel, they use their primary furnaces or their electric arc furnace based on price. So Quebec's Iron Ore isn't as important to Dofasco as it was and Stelco is idle in Hamilton.

[Guillaume]

Frances, let me try to clarify what "separatism" means in practice. There's really a large spectrum of thought and the analysis in English-language media is often simplistic, to use a mild term. It all goes back to decision-making and the way it should be made from the point of view of a minority "nation-state" within the larger confederation. So here's my attempt to clarify the different points of view, from most separatist to most federalist.

A. The independentist view: you can't subordinate decisions to the will of the rest of Canada, or you will be ill-served. Nothing short of independence will be sufficient to fulfill Quebec's ambitions, and the federation cannot be profitable in the long run. The St-Lawrence Seaway (as it was seen at the time), the Borden line (blocking the market west of Québec to Montréal's refining industry, single-handedly creating Sarnia) and the recent Labrador interprovincial power lines are all examples of federal decisions that might benefit the federation but are detrimental to Québec, and are used as arguments by this faction (regardless, if "on average" the federation is a good thing). Not sure exactly how that can fit the logic but I guess an independent Quebec would have an equal seat at the table in managing the Seaway, instead of a minority voice within a united Canada.

Note that no party has really represented this view for decades, although the independentists typically vote with the sovereignist (B). Martin Aussant's new party, Option Nationale, looks like it wants to capture that vote.

B. The sovereignist view: you can gradually or dramatically (eg referendum) expand Québec's decision-making powers while retaining a formal economic attachment to Canada. In practice, it comes to some kind of Quebec veto on Federal decisions, at least when it comes to their application within Quebec.

This is the basis of the PQ/Bloc platform and the goal of the two referendums. It seems to have come to a dead end after the successive failures of Meech and the 1995 referendum, although the Bloc did embody this idea until the last election. The Liberals' "Plan B" (Clarity act, etc.) signaled that the federal government wouldn't be inclined to negotiate the devolution of powers following a referendum. Harper did try to flirt with this base by promoting a more decentralized vision of federalism (see Hébert's "French Kiss") but failed miserably because his party was just too alien to Quebec to make serious inroads. The door is pretty much shut now. (...)

[Guillaume]

(...)
C. The federalist view: you can make Canada profitable for Quebec, gain a significant voice within Canada, have your values influence the rest of the country, perhaps even having a greater say in world affairs by having a bigger loudspeaker. This is the classical Liberal view, from Laurier to 1970s Trudeau, and remains the provincial federalist view (although the provincial Liberals openly flirt with D since Charest came to power). Variants of this have been "asymetrical" federalism, which is basically modifying your policies to better fit Quebec's special needs. This view seems compromised by Québec's shrinking share of the federation's population and by Harper's majority in the last election, without significant Québec support. I interpret the NDP's landslide in Quebec as a failed shift from B to C. This view is often described as that of "closeted separatists" by ROC media, which is very funny when it is applied to staunch federalists like Mulcair or Charest.

D. The "unionist" view: Québec is no different from any other province and should be treated accordingly. The framework for decision-making should be the entire federation, with no particular attention to the Québec outcomes. We are one people united a mari usque ad mare and Québécois culture is no more fundamental than the many who form our multicultural federation. Francophones can thrive in this environment just like anybody else. Further devolution is unnecessary or dangerous. This is more or less Trudeau's view after 1980 and his shift from C to D has led to the federal Liberals' death spiral in Québec (and arguably in the ROC). Nobody really embodies this option on the provincial scene, although the Liberals always make sure to secure its support.

Now you can see why there is so much political turmoil in Québec when a large majority falls somewhere between views B and C, both of which are more unstable than they used to be. This is why parties like the NDP and the new Coalition Avenir Québec (CAQ) party are making inroads by being intentionally ambiguous on where they stand exactly (C and D for the NDP, B and C for the CAQ). The left-wing Québec Solidaire party and the ADQ are all over the map, depending on the day. Likewise the PQ/Bloc are torn between their A&B wings (although that's been going on for a long time, more latently). Hope that makes things clearer, not that they are really clear in Québec.

[Kosta]

Great post Francis! Here's an idea on how the Seaway abetted the rise of Quebec separatism. After completion of the Seaway, Toronto gained a new maritime connection to the rest of the world. This connection improved Toronto's status as an international city, which in turn facilitated the migration of anglo interests from Montreal to Toronto (these interests were of course migrating because of the rise of French culture in Quebec). The fleeing of anglophone populations, and importantly business interests from Montreal left a power vacuum which was occupied by the separatists, which only created more pressure, and further migration of anglophone business interests, and further expansion of separatists.

In the alternate reality where the St Lawrence Seaway wasn't built, a significant portion of the anglophone shipping, trading and business community which migrated to Toronto in the 1970s and 1980s would have stayed in Montreal and spent its political capital in improving anglophone fortunes. Perhaps this additional political capital would not have made a difference (or potentially even worsened the situation). But on the other hand, this additional anglophone presence may have stemmed part of the separatist tide.

[Tim]

In the present day one of the issues Halifax has as a port compared to Montreal is that it is only served by one railroad CN. However it has a very deep harbor compared to the St Lawrence and many US East Coast ports including even New York and thus as the average cargo ship gets larger and larger it should be to recieve greater amounts of traffic. It us also the closest North American port to Northwestern Europe and the Strait of Gibraltar thus it usually ends up as an all important first or last port of call. However in recent years many major international shipping lines have pulled out citing the intractibility of CN and its "monopoly." For some shippers Montreal is not alternative for example Roll on Roll Off shipping lines serve the Canadian market exclusively through Halifax thus all new car import and exports from Europe have to the go through Halifax and its CN monopoly.

The other interesting proposal that is out there and has I believe has some likelihood of being built eventually is the so called "megaport" being proposed in Melford, NS on the Strait of Canso. This terminal would serve so called Suez-Max vessels such as the Emma Maersk which currently can only service about 7 or 8 ports in the entire world and believe none in North America right now. Interestingly and perhaps why I think this port could be built is the development team behind it is the same one that is behind the new container port in Prince Rupert, BC the US government is complaining about so much. Melford though has the same problem as Halifax in being exclusively served by CN having said that Prince Rupert, BC is solely served by CN also and the port there has had some early success.

[Determinant]

Ten years ago now Burlington Northern Santa Fe, one of the four large mainline (Class I) railroads in the US wanted to merge with CN. BNSF serves everywhere west of the Mississippi. CN has Halifax which is a day's sail closer to Europe than anywhere else on the North American freight network.

BNSF does a lot of business carrying containers out of the Ports of Los Angeles and Long Beach. Halifax by single line haul would be the dream. It would also have precipitated the final merger of North American railways into two "serve everywhere" systems.

It didn't happen due to regulatory disapproval. It was a marginal business case anyway. BNSF is now wholly owned by Hershire Hathaway, the investment vehicle of Warren Buffett.

[Jim Rootham]

@Kosta

Nice theory. Doesn't hold up to the facts about the level of shipping going into Toronto. There is almost none now and I don't remember there being much from the 70's onward. At this point Goderich does more tonnage than Toronto. The Toronto Port Authority has recast itself as a real estate scam.

[Frances Woolley]

Guillaume, thanks for that Quebec politics 101.

Tim, that's interesting about the CN monopoly and the new megaports.

Kosta - my initial theory was similar to yours, but when you look at the goods that actually are shipped through the Seaway - coal, iron ore, grain - it doesn't seem to fit. When businesses left Montreal, they didn't turn to the Seaway, they turned to trucks and rail.

[Gregory Sokoloff]

Francis, thanks for the splendid post. And while we're on the subject of economics and Quebec separatism, I'm wondering whether the ongoing Euro crisis has given pause to the PQ brain trust. Parizeau's position once was that a sovereign Quebec could go merrily on its way using the Canadian dollar in a monetary union with Canada even without Canada's consent. Suddenly this looks a lot less plausible, it seems to me. And without a monetary union, any concrete proposal for separation might be even less palatable to Quebecers. Maybe Guillaume has a view on this. (Sorry for the digression.)

[Nick Rowe]

Gregory. Yep. As far as I can see, the whole Euro problem means the once-mooted Amero (common currency for Canada, US, and Mexico) is now dead, as is the idea that a separate Quebec would keep the Loonie.

[Gregory Sokoloff]

Nick, unless, of course, the Euro is miraculously saved in the nick of time, and the whole episode ends up being a cautionary tale on the proper management of a monetary union. BTW, my bet is still that Merkel gets whatever she wants, and she says she wants to save the Euro. But now I'm starting to wonder whether she may be secretly executing a diabolical plot to get Germany off the Euro while laying as much blame elsewhere as possible.

[Nick Rowe]

Gregory: even if the Euro problem is "solved" in that manner, people will (with good reason) all hate the solution. Like the recent "coups" on Greek and Italian governments.

http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/09/a-shotgun-wedding-for-the-united-states-of-the-euro.html

[Gregory Sokoloff]

Nick: it seems that Wolfgang Schäuble is attempting to use the crisis to achieve full political union with a directly elected president. I'm not sure you're right that the population would hate everything about this prospect. Paradoxically it would reduce Germany's power, and break the current de facto imperialism that Germany is exercising over its neighbours. And Europeans would love to elect Obama for president if his services were no longer required stateside!

[Jacques René Giguère]

Frances: I wrote my first comment very fast. It looks a little bit snarky. Wasn't intended as such.
Too busy to do a whole post , which will have to wait for tomorrow,but:
Gregory Sokolof: "Parizeau's position once was that a sovereign Quebec could go merrily on its way using the Canadian dollar in a monetary union with Canada even without Canada's consent."

C!ohC! Parizeau was one of Canada's foremost expert on fiscal federalism in the 50's and 60's ( and member of one of the richest business family in QC.That'a how he could have studied in Europe.). What turned him into sovereignty was
a) his dealing with the Ottawa bureacracy for which he sometimes worked showed him that any country that treated someone like him as if he was an idiot because he was Franco would treat ordinary people even worse and that was not a country into which he wanted to live. ( As someone who have been told in downtown Montréal "If you're rich enough to have an Amex card, you're rich enough to speak english", I understand.)
and
b) you cannot manage an economy as geographically large with as many different regions (5,6,8?) all on different cycles within a single currency area. Equalization payments and unemplyment insurance are a very poor substitute for your own currency, especially if the provinces paying out (ON then AB now) don't understand they are being subsidized by a low exchange rate (for them) and the receiving provinces are not lazy bums but victims of a too-high exchange rate. It doesn't help if you hate the receivers guts ( it's always lazy QC never mooching Maritimers...).
Early PQ programs always had a QC currency. But explaining exchange rates mechanism is rarely a way of getting traction from the Low Information Voters even if you explain how it will boost growth and lower unemployment. Especially if the federal propaganda tells you the "piastre à Lévesque"

http://www.google.ca/search?q=%22pastre+%C3%A0+Levesque%22&rls=com.microsoft:fr-ca&ie=UTF-8&oe=UTF-8&startIndex=&startPage=1&redir_esc=&ei=pVfHTs7_NOfk0QGA_MAI

will be worth 65¢...
(OK in the 80's the "piastre à Trudeau-Mulroney" was worth 66¢ but we should not confuse things...)
So the line went to we will use the C$, which you can do if you run a CA surplus, hoping that Canada's actions after independance would convince people of the right thing to do.
Please. Never, ever take your information about QC from TheGazette-Globe&Mail-Maclean's...

[Frances Woolley]

Jacques Rene: "Frances: I wrote my first comment very fast. It looks a little bit snarky."

No worries, I didn't realize "Except for the link with separatism which belong in the editorial pages of The Montreal Gazette or the Globe & Mail..." was an insult. I thought you were being complimentary.

The Golden Dream also has a long discussion of the politics leading up to the build up of the Seaway. I'm finding it a little hard to get through, but have learned a few things.

E.g. a Seaway project was on the cards but then was actually blocked by MacKenzie-King, who figured that it would jeopardize his Quebec-based coalition. So the Quebec opposition to the canal was very long standing. Though a lot of that opposition came from from wealthy Montreal business interests, who I wouldn't really identify with separatism (Parizeau notwithstanding).

How little we really know about each other...

[Guillaume]

Gregory: I'm pretty sure the PQ/Bloc are too busy with their troubles to reinvent their hypothetical monetary policy. Although clearly they will have to do it some point down the road. I always thought it was a stupid position to pretend to use the CAD after separation. Independent monetary policy could actually be an argument for independence if Canada is not an optimal currency area.

[Gregory Sokoloff]

Guillaume, thanks, I suspected as much.

Jacques, thanks for the historical summary which, believe it or not, was not all news to me. I just read Dividing the House: Planning for a Quebec without Canada (Harper, 1995) which, though very partisan, makes for eerie reading in light of the Euro crisis. If separatism ever becomes a plausible reality again, I would be surprised if the currency issue did not play a bigger role in the debate after the debacle in Europe.

[Determinant]

The Halifax problem is easily solved if CN is mandated to give trackage rights to CP from Saint John to Halifax.

This is not a dream, after the last round of mega-mergers in the US where the mainline roads were reduced to two competitors serving everywhere, the Surface Transportation Board required that trackage rights be assigned to the other railroad for hundreds of miles. For instance Union Pacific owns both lines (ex Southern Pacific and Western Pacific) from Salt Lake City to San Francisco, the bottleneck of the transcontinental route from Chicago to San Francisco. The STB mandated that BNSF get trackage rights to run trains from SF to Salt Lake City so that SF and Oakland have adequate rail competition. There are numerous other examples.

A plaintive Nova Scotia premier and a sufficiently large jobs promise would motivate the Federal government to mandate that CP get trackage rights to Halifax.

On Parizeau, he may have been bright but the continued use of the Canadian dollar was not the only time he departed from reality. You can find his planned winning "Yes" speech online and it has the air of unreality about the process and results he expected would occur.

[Frances Woolley]

Jacques Rene: "Too busy to do a whole post , which will have to wait for tomorrow"

Hope you have time soon, I'm really looking forward to hearing your thoughts on this.

[Alex Plante]

Interesting post. I've always been interested in economic geography and economic history, and I've lived in Montreal all my life (in fact I grew up next to the St-Lambert locks), so I'm very interested in the subject.

Unfortunately I don't think the Seaway had big impact on the economic development of Quebec, except for the development of the iron ore deposits in the North Shore in the 60s and 70s.

If anything had an impact on separatism, I think it was more the Auto Pact, that by turning Southern Ontario into an extension of the US Great Lakes heavy industrial belt, had the effect of concentrating heavy industry in the part of Ontario located south and west of Oshawa, at the expense of Quebec (or even of Eastern Ontario). Ironically, the combined effect of Quebec separatism and low commodity prices from 1984 to 2000 caused the Canadian dollar to sink after 1976, and thus prevented Southern Ontario from becoming a rust-belt similar to the US Great Lakes region (or at least did until recently).

[Frances Woolley]

Alex - I never thought of the connection between the Auto Pact and separatism. Or Western alienation, but there is something there too - the Liberal party's long decline in the West began not long after that.

[Jacques René Giguère]

Part of the great post everybody is waiting for since last Sunday. Still working on it as term papers flood in...
Autopact. Yes it increased alienation among QC economic elite. Even though it made total sense to build cars in North American car heartland, it didn't result that they should be made in Ontario. Could have been made in Ohio 100 Klics to the south.This blatant piece of managed trade ( as opposed to free trade where we would have exchanged US cars for maple syrup) favored Ontario in the purest Ontario-is-Canada-Canada-is-Ontario manner that has been the mantra of the business-deputy minister gand since the 1830's. We could have defended that if surplus labor had existed in ON. But that surplus was partly in the Maritimes and mostly in QC. Those surplus existed because of the misaligned exchange rate due the the common currency plus economic apartheid ( my spam filter is set on high on this one. No Gazette_G&M-Maclean's IP authorised to comment.)
Normally this excess labor should have gone to ON but there was no way you could go from QC to someplace where they hated your guts. ( We are talking 50's early 60's here, another civilisation).
So you needed massive immigration of semi-qualified people into ON. And then you could crow about entrepreneurship and good management and paying equalization payments to lazy mooching QCers and blahblah. The mechanics of equalization payments was a staple of any QC second-year course for a bachelor degree in econ during the '70's. Probably not that much in the rest of Canada. Maybe Masters at Queen's ot Western Ontario.
Fun thing is that now ON is stuck with an industry that should never have existed in the first place, with a bunch of too-late-to-retrain middle-aged men while QC workers are into pharmaceuticals and aeronautics. Hoisted by your own petard anyone? Bueller?

Alex Plante. CohC!
I have a programmed key to Pierre Fortin May 1996 CEA presidential address

http://www.jstor.org/pss/136214

p. 766 in the Nov 96 issue
"A third explanation of the slump is the political uncertainty...A key implication... is that the deterioration...from that source would have been more pronounced in the region that has been the main cause of the difficulty...But this prediction receives no empirical confirmation.." Read the whole thing.
Here is a spreadsheet showing the evolution of QC employment and unemployment vs ON since 1966.
It is a very simple work suitable for only introductory macro or regional ecn and some hypotheses are strong but the general result is clear.

The spresdsheet is here

http://worthwhile.typepad.com/chomage.xlsx

U in QC is often claimed to have been low in the '60's and to have risen when the natives got restless. 4.1 vs 2.6 in ON annual average in 1966.
Yet participation rate was lower. Strong behavioral hypothesis: lower participation is due to lower employment. So, take the difference in participation in ON and QC, consider them unemployed, add that difference to both unemployed and active in the labor force and recompute U. Do a ratio QC/ON in the last column. You then get UQC = 10.2 vs UON = 2.6 for a ratio of 3.92.
The max ratio is 4.14 in 1969.. Hence Robert Bourassa's electoral slogan of 100 000 jobs in the 1970 election. Then the ratio constantly decline. ( Recomputed U rise reach a max of 23.2 during the 82 recession but the ratio is still only 2.36)
Today the ratio oscillate around 1.20.
High U in the 70's was due to
1) massive entry of educated baby-boomers ( higher education due to the Quiet Revolution) (Remember that in 1940, a French-speaking Québécois was less likely to go to university than a Mississipi black ( Not a Louisiana black or a Mississipi white...) and we now have university graduation rate in the class of Massachusetts or Connecticut...
2) the rapid death of the "secteurs mous" (soft sectors) (clothing,shoes...) That death took place in barely 20 years instead of 2 or 3 generations as everywhere else.

[Jacques René Giguère]

Part of the great post everybody is waiting for since last Sunday. Still working on it as term papers flood in...
Autopact. Yes it increased alienation among QC economic elite. Even though it made total sense to build cars in North American car heartland, it didn't result that they should be made in Ontario. Could have been made in Ohio 100 Klics to the south.This blatant piece of managed trade ( as opposed to free trade where we would have exchanged US cars for maple syrup) favored Ontario in the purest Ontario-is-Canada-Canada-is-Ontario manner that has been the mantra of the business-deputy minister gand since the 1830's. We could have defended that if surplus labor had existed in ON. But that surplus was partly in the Maritimes and mostly in QC. Those surplus existed because of the misaligned exchange rate due the the common currency plus economic apartheid ( my spam filter is set on high on this one. No Gazette_G&M-Maclean's IP authorised to comment.)
Normally this excess labor should have gone to ON but there was no way you could go from QC to someplace where they hated your guts. ( We are talking 50's early 60's here, another civilisation).
So you needed massive immigration of semi-qualified people into ON. And then you could crow about entrepreneurship and good management and paying equalization payments to lazy mooching QCers and blahblah. The mechanics of equalization payments was a staple of any QC second-year course for a bachelor degree in econ during the '70's. Probably not that much in the rest of Canada. Maybe Masters at Queen's ot Western Ontario.
Fun thing is that now ON is stuck with an industry that should never have existed in the first place, with a bunch of too-late-to-retrain middle-aged men while QC workers are into pharmaceuticals and aeronautics. Hoisted by your own petard anyone? Bueller?

Alex Plante. CohC!
I have a programmed key to Pierre Fortin May 1996 CEA presidential address

http://www.jstor.org/pss/136214

p. 766 in the Nov 96 issue
"A third explanation of the slump is the political uncertainty...A key implication... is that the deterioration...from that source would have been more pronounced in the region that has been the main cause of the difficulty...But this prediction receives no empirical confirmation.." Read the whole thing.
Here is a spreadsheet showing the evolution of QC employment and unemployment vs ON since 1966.
It is a very simple work suitable for only introductory macro or regional ecn and some hypotheses are strong but the general result is clear.

The spresdsheet is here

http://worthwhile.typepad.com/chomage.xlsx

U in QC is often claimed to have been low in the '60's and to have risen when the natives got restless. 4.1 vs 2.6 in ON annual average in 1966.
Yet participation rate was lower. Strong behavioral hypothesis: lower participation is due to lower employment. So, take the difference in participation in ON and QC, consider them unemployed, add that difference to both unemployed and active in the labor force and recompute U. Do a ratio QC/ON in the last column. You then get UQC = 10.2 vs UON = 2.6 for a ratio of 3.92.
The max ratio is 4.14 in 1969.. Hence Robert Bourassa's electoral slogan of 100 000 jobs in the 1970 election. Then the ratio constantly decline. ( Recomputed U rise reach a max of 23.2 during the 82 recession but the ratio is still only 2.36)
Today the ratio oscillate around 1.20.
High U in the 70's was due to
1) massive entry of educated baby-boomers ( higher education due to the Quiet Revolution) (Remember that in 1940, a French-speaking Québécois was less likely to go to university than a Mississipi black ( Not a Louisiana black or a Mississipi white...) and we now have university graduation rate in the class of Massachusetts or Connecticut...
2) the rapid death of the "secteurs mous" (soft sectors) (clothing,shoes...) That death took place in barely 20 years instead of 2 or 3 generations as everywhere else.