by John English
In his Thanksgiving address, Trudeau said that the benefit of controls was that it would give “people time to understand and adopt the real cure, which is a basic change in our attitudes.” Not surprisingly, this call for individual restraint rang hollow amid the furor over the pool, the pay raises, and other Ottawa “excesses.” Bob Stanfield charged that “trust and confidence have been injured in our society.” That fall Trudeau seemed distracted in the House. The attack on controls was relentless from labour and, increasingly, from business. But the polls indicated that most Canadians shared Trudeau’s conclusion that the controls were necessary to shatter the inflationary expectations and, even more, to rein in the power of corporations and unions that served their own interests, not the common good.
Christmas 1975 was a difficult time for Trudeau. Margaret was once again caught in the psychological turmoil he simply could not understand. The polls were bad, the country’s mood cynical, the prospects for the new year poor. At the Bank of Canada, Governor Gerald Bouey began to follow monetarist approaches, a policy that won support in the increasingly conservative business community. Nevertheless, Trudeau was in an expansive mood when he met CTV reporters Bruce Phillips and Carole Taylor for an interview on December 28. Taylor asked Trudeau, “What kind of new society do you see emerging?” Trudeau answered at surprising and dangerous length.
“Well, it’s amusing, but I have been talking like this for five years now anyhow, perhaps seven or eight. The need in the changing times … to develop new values and even change our institutions … I think the first shock came in ’73 with the OPEC crisis, and suddenly the industrialized world realized that it could be held to ransom for its supply of petroleum. It was a shock then and we … began to forget about it until we came to this control situation a couple of months ago. And people are realizing it’s a different world and that you can’t live in a different world with the same institutions and the same values that you had before—”
“When you mention a new society and a new economic order,” an intrigued Phillips interrupted, “are you thinking in terms of the possibility of a complete rearrangement of the centres of power and decision making in Canadian society? Something on the Swedish model for example, a syndicalist or corporate state where the government deals directly with the big groups such as the corporations and the labour unions and every year makes a social and economic contract?”
Trudeau took the bait. “Bruce … one thing I’d want to make clear at the outset is that there is no master plan in my mind or in some little elite group in the Prime Minister’s Office which will tell the world in general and Canada in particular where it must go in the next little while. I think there’s a great deal of unease in the society. People are wondering who is in charge of the economy, who is in charge of the society, and they’re concerned. They’re worried, and they have cause to be, and it’s my job as a politician to try and not only see where we’ve been and where we’re at but where we’re going, and I’m telling you that in most of the areas we’ve been discussing, the economy, the society, the international relation aspect, we’ll have to take new directions, new and bold directions. The example you took on controls, economic controls, is very significant. Many people still see those controls as … a bit of strong medicine we’ll have to take in order to get inflation down, but it’s really more than that. It’s a massive intervention into the decision-making power of the economic groups and it’s telling Canadians we haven’t been able to make it work, the free-market system. We’ve ended up with very high unemployment and very high inflation. We can’t go back to what was before with the same habits, the same behaviour, and the same institutions, otherwise we’d be back to high unemployment and high inflation. So I have to get all of us to try and think what was wrong. You know, there’s obviously no easy answers and there’s no specific scapegoats. It’s not the unions and it’s not the government and it’s not a matter of saying, well, if you just would tighten your belt a little bit up in Ottawa, everything would be fine.”
“Is it ‘bigness’?” Taylor asked.
Trudeau agreed it was: “Therefore our problem is how do you deal with bigness, not how do you do away with it. And some economists say all you’ve got to do is get back to the free-market system and make this market system work. It won’t, you know. We can’t destroy the big unions and we can’t destroy the multinationals…. But who can control them? The government. That means the government is going to take a larger role in running institutions, as we’re doing now with our anti-inflation controls—and as we’ll presumably be doing even after the controls are ended because, I repeat, we don’t want to go back to the same kind of society with high unemployment and high inflation. And this means that you’re also going to have big governments. And it’s not simply a matter of saying this government is spending too much and if they’d only cut down, things would go better. Things don’t go necessarily better because we spend less on health or on welfare and leave the private sector free to spend more on producing baubles or multicoloured gadgets. The state is important, the government is important. It means there’s going to be not less authority in our lives but perhaps more.”
“I’ve always thought of you as a sort of small L liberal,” Taylor remarked, “a believer in civil rights and the maximum amount of individual decision-making power, yet you seem to be winding up now presiding over a government which in your estimation is going to get bigger and more powerful and more likely to be making interventions in the state.”
“Liberalism is not a doctrine, it’s not something that you apply,” Trudeau responded. “Liberalism is a way of thinking, a way of approaching problems to make sure that the individual gets the maximum of respect and, hopefully, as great an amount of equality of opportunity in Canada, in the world, as possible without being doctrinaire about it.” If you need “more control of the big people,” only the state can do it in a way that would permit “more flourishing of liberty in all the other areas, whether it be education or the arts or small enterprise.” The state must intervene to protect that liberty to make sure that the “strong and powerful don’t abuse their strength and power in order to take freedoms away from the little man.”
“Aha,” Cossitt declared the following day: “The Prime Minister clearly illustrated what many believe to be his real intention all along—namely, to take Canada right down the road to a dictatorial form of socialism or a similar form of plain old fascism, and that he will use just about any means or excuse to get there, even using the obviously necessary fight against inflation for such a purpose.”17
Cossitt’s analysis echoed much chatter at the doughnut shops across Canada, although the latest exploits of hockey greats Bobby Orr and Guy Lafleur probably maintained their dominant position. More serious was the extent to which a similar interpretation took hold in the boardrooms along Bay Street, the ski chalets at Tremblant and Whistler, the dining room of Calgary’s Petroleum Club, Simon Reisman’s living room, and even the Leeds Federal Liberal Association—which sent a letter to all Liberal associations across the country, claiming that Trudeau was “making statements which violate the very essence of Liberal philosophy and accentuate the differences between the federal Liberals and the true Liberals of Ontario.” Earle McLaughlin, the chair of the Royal Bank, demanded an election if Trudeau wanted to change Canada’s economic system, and Edgar Burton of Simpsons department store chain denounced Trudeau as a socialist, whose comments were “the most irresponsible thing I ever heard him say.”
While Otto Lang assured westerners that Trudeau still believed in free enterprise, Alastair Gillespie persuaded Harold Corrigan, the president of the Canadian Manufacturers’ Association (CMA), to call a meeting at the exclusive Toronto Club for January 4,1976. Corrigan opened the meeting and came immediately to the central question: “It was not necessarily what the Prime Minister had said (or even indeed what he might have meant) but what a very large majority of [CMA] members perceived him to be saying—that the free e
nterprise system had failed and that the government was going to have to design something else to take its place.” Corrigan then asked Gillespie: “Is he trying to turn Canada into a socialist state using the powers of the anti-inflation legislation?” Gillespie responded in kind, telling the group that they could “react in a way which conveyed the impression to the public that the free enterprise system was designed for their benefit (or should at least be directed by them); that it is a static system for the benefit of vested interests; that it is unchanging and unchangeable,” or they could “take the position that the free enterprise system is an evolving system, a resilient and dynamic system which had adjusted to change in the past, and would adjust to change in the future to meet the public interest.” He left hoping that the group, which included Turner’s future law partner Bill Macdonald, accepted the second interpretation. It did not.18
As the fury mounted, Trudeau was silent. The CTV interview had been aired on December 28, one day after it was taped, and Trudeau departed the same day for a vacation in St. Lucia, followed by a skiing holiday in British Columbia. When reporters finally found him on his vacation and asked about the controversy, he said he had “no worries” about the uproar. His comments horrified many colleagues, and he tried to repair the damage with a nationally televised speech to the Canadian Club of Ottawa on January 19, 1976. Trudeau denied that he had questioned “free enterprise.” He emphasized that he had spoken about the “free market,” which was not working and, indeed, had not worked in pure form since the Great Depression: “I have said that we haven’t been able to make even a modified free market system work in Canada to prevent the kinds of problems we are now experiencing; and it will do no good to try to create a pure free market economy to solve our future problems, because that won’t work either.” Canada would maintain a mixed economy, and “very large sectors of the economy” would remain “where the free market and consumer choice continue to flourish.” He attacked his critics for calling him a communist, a fascist dictator, and a radical leftist. “You can understand my hesitation,” he remarked, “when my children ask me what I do for a living.” He tried to provide reassurance, claiming that the government had no intention of introducing more regulation in small business, for example, “where free enterprise is strong, where individual initiative, independence and risk-taking are present, where self-reliant men and women continue to build a better life for themselves and their communities.” The issue was simply “to what extent we will be controlled by government regulations, and to what extent we will be controlled by our own sense of responsibility.” Labour and big business faced a choice, as did all Canadians.
When the speech received poor or lukewarm reviews, Trudeau knew much damage had been done.19 Polls soon confirmed Trudeau’s fears, as the Liberals fell dramatically and the Conservatives surged under their new leader, Joe Clark of Alberta.*
What did Trudeau really mean? In truth, largely what he had said in his remarks in the Christmas interview. To be sure, his comments lacked focus and reflected confusion and even uncertainty. He had been reading Galbraith’s recent tome, Economics and the Public Purpose, and had absorbed its argument for state activism and regulation, its defence of the social welfare state, and its wariness of big business and big labour. Indeed, Trudeau jokingly told Galbraith later that he hoped his remarks had helped his royalty statements, which they surely did in Canada. Yet Trudeau had resisted controls to the very end, until pressure from ministers, caucus, and the business community forced him to agree to impose some controls. And he did not dissent when Breton sharply criticized Galbraith. His wariness of big business was not ideological so much as practical—the attitude of a small businessperson who resented the market power of the large oil companies that boosted the costs of fuel for the apartments his family owned in Montreal. Trudeau had always taken an active part in the management of the small operations that made up the Trudeau family fortune. His attention to detail is clear, as when he opposed the excessive price that his family’s amusement park (Parc Belmont) paid the giant Conklin organization for the “Hot Rods,” “Silly Lilly,” and “Costume Bob” rides. His papers are crammed with the family’s financial records, and he paid close attention to the impact of taxes on his decisions.20
Although Trudeau understood business well, he did not think of himself as a businessperson, and his remarks in the interview reflect other influences, ranging from the social thought of the Roman Catholic Church through the socialism of his early mentors Emmanuel Mounier and Harold Laski to John Kenneth Galbraith. And his family believes that he blamed the character of business life for his father’s early death, a factor whose influence cannot be measured but is surely significant.21 With characteristic inquisitiveness, Trudeau was taking sides in the emerging debate about the management of the economy. He dissented from those who called for deregulation but knew that traditional Keynesian approaches had become ineffective. He was baffled and not alone: the prominent Ontario economist Ian Macdonald, who was then president of York University, asked in the fall of 1976: “Can we manage the economy any more? … Judging from the performance in the [May 1976] budget, the answer must be ‘no.’ That is not intended to dismiss the Minister’s efforts or good intentions, but rather to ask the question whether ‘the budget,’ as a single instrument, can really do the job today that was assigned to it in the pure world of Keynesian ideals.” Macdonald went on to say that, in the past, he “was as guilty as any when teaching monetary and fiscal policy of applying the unitary state of Keynesian economics to the Canadian federal system,” but what occurred in the classroom did not reflect the real world of Canadian politics and its many policies. A former senior adviser to Conservative Ontario governments, Macdonald essentially agreed with Trudeau’s analysis that “new values and new institutions” were needed and that the academic Keynesian hopes no longer fit the reality Canadian policy makers were likely to encounter.22
Trudeau shared these views about the ineffectiveness of applying traditional approaches, usually termed Keynesian, in the seventies. However, in the emerging debate between, on the one hand, monetarists or neo-conservatives and, on the other, the supporters of the postwar welfare state (for which Keynesian policies provided an intellectual foundation), Trudeau strongly took the latter’s side. His economic panel had made him well aware of the debate, and in his Christmas interview he had referred to the monetarists, who wanted to “get back to the free-market system and make this market system work.” He had a simple answer: “It won’t.” He did look to European social democracy for models and told Helmut Schmidt, a Social Democrat he admired greatly who shared his own “middle-of-the-road liberalism,” that the German system of labour-business cooperation intrigued him. He and Schmidt began to work together on North-South questions in the mid-seventies, and the contemporary debate on a new international economic order also affected his views. He made little attempt to conceal them in private conversations.
In a remarkable “philosophical” conversation on August 6, 1976, with Thomas Enders, the impressive American ambassador to Canada, Trudeau reiterated the essence of what he had said the previous Christmas. He argued “that the economic systems of the industrial democracies are no longer working well and must be reformed fundamentally” and “that the industrial democracies are losing the struggle for the developing world.” Trudeau referred “frequently to Club of Rome thinking on the need for new political and moral approaches to economies.” Although he dismissed the extreme views of the Club’s book The Limits to Growth, he did believe that “the great inflation and the ‘great wastefulness’ of the seventies shows that something is fundamentally wrong…. The market system, intended to mediate greed for social benefit, is instead being dominated by it, with each group vying to outgrab the others.” A new social contract was needed, Trudeau concluded.23
And so, for many reasons, Trudeau took a strong position in this political and socioeconomic debate—because of his social Catholicism; his admiration for Euro
pean social democracy and the equality of northern European societies; his suspicion of big business and, increasingly, big labour; his belief in the possibility of benevolent state action; his antipathy for the “wastefulness” of North American development bred from his love of the wilderness; and his longtime association with those who drew a lesson from the Depression that the free market could not deliver the public goods essential in a modern society. In taking sides, Trudeau gave greater clarity to what he meant by the “Just Society” than he had when he first used the term in 1968. However, the link he made between the broad questions of the role of the state and the specific Canadian policy of wage and price controls was strained and unconvincing. Already, by August 1976, he could tell Enders that most other leaders at the G7 now regarded the surge in inflation as the product of exceptional circumstances, rather than a fundamental change in the character of Western economies, and that they believed state spending had been excessive. Nevertheless, Trudeau’s opposition to the rise of monetarism and its neo-conservative interpretations continued, and he refused to restrict the state to only limited areas of activity. As he told his friend Helmut Schmidt, an inveterate sailor, in navigating the winds of economic change, he would tack to the left.24