How Does Globalization Affect Canada

During his budget speech of 1998, Finance Minister Paul Martin believed that the Canadian budget, while important, was not the only aspect of Canada that was important. He believed that "there is more to taking care of a nation than simply taking care of the books. Canada is not just a market place. It is a community "(qdt. In Campbell 261). Martin was referring to the affects of globalization within Canadian society and economy, believing that we could shape these aspects without them being fully influenced by global markets. In essence, we would thrive in the global marketplace without losing our sense of a Canadian community.
Globalization is a force that has affected both unitary and federal systems around the world. Individual states have adapted to trade within these international markets in order to experience economic prosperity. While globalization has affected national economic structures, it has also taken a foothold on public policies within states. However, how these policies are affected varies from state to state. As

stated by Susan Strange, the way in which governments are affected by these policies " do so very differently, sometimes putting snakes in their path, sometimes ladders" (qtd. in Skogstad 812). In the case of Canada, some may see globalization as 'putting a snake' in the path of the federal government. The landscape of Canadian fiscal policies varies drastically from other federal states, where much of the economic activity occurs at the provincial level, rather than federal. As a result, the relevance of the federal level of government in Canada has been called into question; is it still an important political and economic force, or have the provinces become the most important units of political relevance within Canada?
Along with the economic activity, based on the constitution act of 1867, the provinces have the exclusive right to legislate over matters of social welfare, such as the major aspects of education and health care (Boadway 303). This legislative control over Canadian social welfare programs have acted as a force for provincial economic relevance over federal, as the social welfare programs are a major expense within Canadian Society. However, while the fiscal decentralization and provincial social welfare agenda have possible reduced some of the federal relevance, it has in no way eliminated it. The federal government still plays an important role in fiscal policies in other avenues. The federal government is responsible for the national well-being and the "Canadian Community" as a whole, and has therefore taken on different fiscal roles than the provinces. It has become the fiscal overseer, ensuring that Canada as a whole pulls through times of economic crisis, that all provinces receive a comparable quality of social services through equalization, that the multicultural identity of Canada is protected, even in global markets, and that as a nation, it is able to adapt to and overcome new social and economic challenges. (possible run on ?)
Why the Provinces Matter
Provincial economics, as a result of history and globalization, play a significant role within the Canadian economy. In terms of decentralization, Canada has one of " the most decentralized fiscal relations in the world"( Brown 268 ), allowing for the provinces to control the major aspects of an independent economic policy from that of the federal government. This decentralization is on contrast with other federal governments, particularly our biggest trading partner and neighbours to the south, the United States. As stated by vipond in his comparison of the American and Canadian federal systems, he states how the American system is much more fiscally centralized, as the federal government share of expenditures was significantly higher than the states, as compared to Canada where the federal and provincial governments endure roughly equal expenditures ( Vipond 89 CP). Robert Campbell reiterates the provincial decentralization, stating that the provinces "spend 70 per cent more on programs ... and 3.5 times as much on goods and services ( Campbell 236 ). The effect of the major fiscal differences gives the provinces the ability to control aspects of their own economic agenda while having the fiscal means necessary to do so.
While the provinces have this economic decentralization disperses policies into the hands of the provinces, it does so with a purpose. As a result of globalization, provinces are no longer competing in domestic or regional markets, but on a global scale. However, while as a country we are involved in global trade, the provinces are involved in global trade with certain partnerships. In his case study of globalization and its effect on regional disparity in Canada, Serge Coulombe states how Canada's vast size has an effect on economic policies; while " British Columbia belongs to the Asia- Pacific Rim, Ontario to the Great Lakes Economy, while St. John's in Newfoundland is closer to London than to Vancouver"(Coulombe 2007). Coulombe draws on Canadian geographic and its effect on economic interactions; an economic policy that works for Ontario's economy may have a negative effect on the economy of British Columbia. This decentralized fiscal policy also allows provinces to control the majority of welfare state services. There legislative power comes from section 92 of the Constitution Act of 1982, where they are given the exclusive control over services such as education and health care ( Boadway 303). Therefore, decentralized fiscal policies have a positive affect for provincial markets. It allows them to cater to specific need of that province and the markets they trade with. They can adapt their own fiscal policies to independent provincial industries which will be beneficial for their sub-national economy, while catering to the needs of the citizens of a particular province. Combined with their control over services, such as health care and education, the provinces have been given a great deal of power. In a global market setting, they have become extremely relevant actors, and as a result, have lead to question the federal economic relevance within Canada. However, while the provinces have become relevant actors, it does not cast out the importance of federal fiscal policies.
Why the Federal Government Matters: Economic Crisis
As Paul Martin described, there is a sense that Canada is a community, leading to an overall national economic interest and general economic and social wellbeing that should be available to all Canadians; this national wellbeing is the aspect, which the federal government has a monopoly on. They act as the overseers of a Canadian national interest, ensuring that provincial economies as a whole are successful, leading to overall economic prosperity for the Canadian community. As stated by Grace Skogstad, " public policies are more than solutions to problems; they incorporate a societies shared beliefs about the ends to which it is striving collectively, as well as the means of achieving these goals"(Skogstad 806). Skogstad's view on public policy relates to the political fiscal roles of the federal government; to ensure that Canada, as a nation and not individual provincial entities, has collective economic goals to ensure the wellbeing of all Canadians. In essence, they act as an economic overseer not to control provincial policies, but to curb them in a manner that benefits all Canadians. One such way to control these policies is through budget initiatives during times of economic crisis, particularly the debt crisis of the 90's, as well as the 2008 global economic recession.
During the 90's, the federal government had an initiative to balance the budget of not only the federal governments, but of the provinces as well. They believed that it was of national interest to lower the Canadian national debt to encourage trade and keep a relatively high national credit rating in order to keep debt interests low. Within the early 90's, the provincial deficits were of great concern, with some provinces going so far as suggesting that there should be a "national debt management strategy" implemented (The Hamilton Spectator 1993). Even within an era with global economic interactions, the need for federal fiscal policies is demonstrated through this debt crisis. While the provinces had the fiscal ability to manage their debts, there was a desire to have a national policy that would demand a national solution and have an effect on all the provinces. The debt crisis would lead to a decrease in equalization payments for health care and education from the federal government( Campbell 240), which were needed to run the various social programs within the provinces. The effect? Changes in the fiscal policies of the provinces to adapt to the problem and reduce their deficits. Through their own fiscal policies, the federal government affected the fiscal policies of the provinces. It allowed for them to remain as a relevant, economic actor that not only had control over federal fiscal policies, but indirectly possessed a great deal of control over provincial fiscal policies. While they may not have full control over provincial fiscal policies, they have the ability to control aspects of provincial policies through budgetary restrictions.
In contrast to their budget management tactics to the debt crisis, the federal government to a national economic management policy towards the 2008 global financial crisis. The federal government took the initiative to promote economic growth and lead Canada, as a whole, out of the recession. The federal government took the initiative to work with international organization, such as the G-8, to provide an attack strategy of how to address the economic Crisis (Brown 272). Along with the global initiatives, the Conservative federal government took an economic management initiative through its economic action plan, which would provide "40 billion into the economy over 2 years in the form of stimulus spending" (Brown 272). These initiatives were a way for the federal government to manage the national and provincial economies; it provided stimulus to the areas that were in dire need of the stimulus to improve their economic situations.
During the aftermath of the Crisis, Paul Martin, who was a leader in balancing the fiscal deficits of the 1990's, was asked how Canada would thrive and prevent another financial crisis from occurring. He responded by stating that on a global level, financial institutions should adhere to global financial regulations, while in the case of Canada, the federal government needed to make investments into " infrastructure, education, and research and development" to thrive economically and produce economic ties with Asian markets(Perkins 2011). While Canada's economy as a whole has been recovering and adapting to these new markets, Martin's statement raises an important point about the relevance of the federal government with respect to Canadian economics. It displays that, in order for provincial trade to develop and integrate into new global markets, federal initiatives in the form of stimulus and international economic diplomacy are needed in order to facilitate this integration.
The Challenges of Today: Economic Equalization and Cultural Protection
While federal economic management has played an important part to the relevance of federal economic relevance, it is not the only aspect that contributes the federal economic relevance.

Canadian economics and globalization have affected the very nature of the long-standing federal government commitment towards equalization payments. While provincial governments have autonomy over their social programs, there is still some national disparity that occurs between provinces. Funding disparities would occur without the proper mechanisms in place to prevent disparities, as oil rich Alberta has greater economic power than the smaller economies of the Maritime Provinces. These differences in provincial economics have lead to the federal equalization payments. These payments are part of the 1982 Constitution act, and allows for transfers to provinces "whose fiscal capacities fall below a representative national standard" (Brown

269).
Why commit to these equalization payments? Put simply, it follows the idea of Skogstad that public policy serves a social belief; it not only serves a belief, but can be used to " forge a common interest and sense of solidarity among Canadians"(Skogstad 824). This belief is one that holds to the principle that all Canadians, in every province, should have access to the same standard of social programs, regardless of the provinces economic status. Equalization payments are the instrument to ensure that the same standard is achieved from Prince Edward Island to British Columbia. Without the federal government's commitment to this policy, social programs have the potential to vary in degree of delivery from province to province, creating the potential for inequalities among the provinces. Therefore, equalization payments remain a crucial part of the federal fiscal policy.
Along with the protection of social programs, the federal government has taken initiatives to ensure the protection of the Canadian Cultural identity, one that is founded on tolerance and cultural diversity (Stansbury 132). While or major trading partner in the United States has had an effect on our culture and economics due to globalization and close proximity, we have been able to maintain a cultural identity that is distinct from the United States. This cultural distinction comes because of federal government policies. Within the grounds of multi-nationalism, the federal government has established protections to try and protect the cultural heritage of Canada, especially French Culture, through acts such as the official language act of 1969 ( Stansbury 151). The federal government have also practice protectionist policies, such as enforcing mandates that a certain percentage of Canadian culture must be portrayed through media outlets, such as television stations and radio (Stansbury 144). These policies allow for the protection of not only the Canadian culture, but also the industries that produce the culture, such as the Canadian film and music industries. Both equalization and cultural protection have spinoff effects. While they initially serve the purposes of capital redistribution and cultural protection, they are also used as a tool to protect national values and Canadian industries, thus having an important economic impact.
New National Challenges
As the protector of national interests, the Canadian federal government must not only address the challenges of today, but also plan for the challenges that will affect Canadians in the future. Among these challenges are the increasing age demographic problem and the effect it will have on health care. The challenge is not one that is province to province based, but affects Canada as a whole. As such, a national strategy to this challenge must be implemented. The aging population is expected to leave Canada with 7.8 million Canadian Citizens over the age of 65 by the year 2026(Canwest News Service 2006). Longer outlooks shed the same forecast, as Statistics Canada predicts that by the year 2056, the dependency ratio will reach 84 dependants per 100 Canadian citizens that are of working age (Dependency Ratio). These figures have a major effect on Canadian fiscal policy. It will lead to increased costs for Old Age Securities and Income Supplements, as it will cost an extra "3 billion each and every year" between 2015 and 2020 (Vieira 2011). On top of these costs, the demographics will have a crippling impact on heath care and funding, as by 2020 the costs on the health care system will be upwards of 38 billion ( Fortin 2006). These extra costs have serious implications for both the provincial and federal levels of government. While the provincial governments do not possess the fiscal capacity to tackle these issues independently, the federal government will have a higher burden to provide more funding in a situation where there is less funding as a result of a higher dependent to working citizen population. The solution is one which is not provincial or federal. It is one which needs cooperation between the federal and provincial governments to develop and integrate a strategy which will address the issue and avoid a demographic crisis.
Some have proposed solutions to the problem. While these solutions do rely on help from the provinces, they begin and have a major impact at the federal level. In a report released by the Canadian senate, a proposed solution was to reduce the federal income tax in order to encourage workers to stay in Canada, avoiding what the senate refers to as a "demographic crisis that could devastate the country's economy" ( Canwest news service). The proposed policy is one which could encourage individuals to work longer, keeping the dependency ratio at a more manageable and stable rate. However, there are potential consequences to the proposed income tax cut. A cut in federal revenue could result in reduced equalization and federal funding for programs such as health care, in order to offset the loss of revenue. These cuts could affect provincial fiscal policies, and as a result lead to provincial spending cuts. Therefore, while the proposed policy is only an example, it serves an important purpose. It highlights the potential effect that a federal policy will have on Canada as a whole, as well as the potential for affecting provincial fiscal policies as well.
Conclusion
Have the changes as result of globalization created an economic situation where the economic relevance of the federal government is reduced? While globalization has been a factor in increasing the relevance of the provincial fiscal policies, it has not reduced the relevance of federal policies. Globalization has lead to provincial specialization into certain economic markets, and allowed them to have more fiscal independence. The provinces are able to have their own fiscal budgets that have a significant impact, as they affect the social welfare programs within a particular province. However, the federal government has an economic relevance in a different respect. It provides a means to reach a national economic stability, particularly in a time of Crisis, such as the 1990's debt Crisis or the 2008 global financial crisis. It functions as the protector of the Canadian community and identity, as equalization payments are crucial in providing the same level of social service to all Canadians and protection of Canadian culture has protected our identity and cultural industries. It is the body that addresses not only the issues of today, but also the factors that will affect our economics in the future, such as an aging demographic that will affect government funding and programs, such as health care. Therefore, the federal government does not sit in the passenger's seat, but rather the driver's when it comes to steering a national economic policy. Ultimately, the federal government is still a prominent force for economics, as federal policies affect the direction of provincial fiscal policies as well. While we may have one of the most fiscally decentralized systems in the world, the Canadian system allows for the provinces and federal government to be economically relevant; it allows for the provinces to look after regional interests, while the federal government protects the entire Canadian community.