When I first entered government, I had much to learn. When I left government, I still had a long way to go. But where I succeeded I did so by working alongside many outstanding public servants from whom I learned more than I can say.
— Paul Martin
SEA CHANGE
In January, 1995, then-Minister of Finance Paul Martin and Prime Minister Jean Chrétien shared a podium as they sought to calm financial markets in the wake of the Mexican peso crisis that had begun in December, 1994. The crisis rocked Canadian markets and caused a run on the loonie in the wee hours – Eastern time – that was stanched only by the Bank of England’s buying up Canadian dollars, according to a long-standing agreement between the Bank of Canada and Britain’s central bank.
Paul Martin announced the intention of the Chrétien Government to bring down a budget that would effectively end some twenty-five consecutive years of neokeynesian deficit spending, in the economic school of an Ontario farm boy and Roosevelt’s economist, John Kenneth Galbraith. The budget that was tabled a month later on February 27th 1995 saw one of the biggest rollbacks ever in the size of the federal government with federal departments slashed by as much as 70%, in the case of Transport Canada. It was a signal achievement: by 2000, the Government of Canada was running regular surpluses which grew to as much as $19 billion in the last budget of the Martin Government in 2005 – 2006. When Mr. Martin began his tenure as Finance minister, the ratio of Canada’s net, public debt – by far, most of it federal – to GDP was in excess of 70%, the second-highest in the G-7. By the time he left 309-S, Centre Block, and Langevin Block in February, 2006, the public debt to GDP ratio had fallen more than forty percentage points to about 30% – the G-7’s lowest.
By itself, that achievement would have guaranteed Paul Martin more than a historical footnote in Canadian, political history. But while Messr.’s Martin and Chrétien stood shoulder to shoulder on that pivotal, January day, they also engaged in one of the great, internecine battles for leadership of the Liberal Party of Canada.
CHARTING A COURSE TO POWER
Paul Martin makes much of the influence of family on his cast of mind. He makes a point of highlighting both his Protestant and Catholic, and Irish and Franco-Ontario roots. Although he doesn’t dwell on his famous father’s career, he does point to Paul Martin, Sr.’s roots in francophone Quebec, the sharp divides in “Old Ontario†which persisted in the Ottawa valley, and how his father’s and his own bouts with polio influenced their understandings of the role of government as an intervener on behalf of the poor in such matters as universal health care.
But he denies that his rise to power was calculated, at least in early days. We learn of someone who politicked with his father as a teenager, but did so in order to spend time with him. We learn of a son who organized “hoop la†– a floor demonstration on the convention hall – for his father’s campaign for the Liberal leadership in 1958 out of a sense of filial obligation.
But the course was clear nonetheless. From serving as Maurice Strong’s executive assistant at Power Corporation and his rise through the executive ranks of Power Corp. to Paul Desmarais’s giving permission to pursue the financing of Martin’s bid to take over Power Corp’s Canadian Steamship Lines, and from the calculation to seek election to the House of Commons from Quebec to his first bid for the leadership of the Liberal Party, Paul Martin seemed driven in his quest for 24 Sussex Drive. That doesn’t make him unusual.
As Martin himself notes, the organization that characterized his father’s 1958 campaign for the Liberal leadership seemed quaint compared to the riding-by-riding tracking and marshalling of supporters that began in campaign of 1968 that saw Pierre Trudeau become the prime minister over his father. Martin expresses appreciation for Pierre Trudeau’s appointing his father to be Canada’s High Commissioner to Britain. But he learned the lesson of organization nonetheless.
DEFEATING THE DEFICIT DRAGON
As might be expected, the battle to defeat Canada’s deficit features prominently. When the Liberals took office, the deficit had been reported to stand at $32 billion. But Martin argues, here, as he did at the time that it was $42 billion. He gives a very compelling account of the urgency of addressing this problem. When he took office, the deficits were in large part financing the government’s interest payments on federal, public debt, and those deficits were, in turn, increasing those interest payments – the debt-servicing load – year over year. As he points out, this amounted to “a vicious cycle.†One of his officials suggested that the deficit could, therefore, reach as high as $60 billion in short order if nothing were done. The challenge was to bring the cycle to a halt before it became a death spiral, and then to create the conditions for “a virtuous circle.â€
Martin recounts how little enthusiasm greeted his 1994 budget. No one – at home or abroad – believed that a Canadian finance minister was serious about addressing the problem. This impelled Martin to take even more drastic steps in his 1995 budget, which featured cuts as high as 70% to the Department of Transport. He credits Marcel Massé, the senior public servant who left the public service to seek elected office, who was President of the Privy Council, for his leading the process to identify cuts with the “Program Review.†However, Martin does not give credit where credit is due.
During the 1993 campaign that saw the Reform Party elect fifty-two MPs and immediately upon the 35th Parliament’s opening in January 1994, Preston Manning spoke vigorously in favour of defeating the deficit and restoring domestic and international confidence in Canada’s federal, fiscal management. Manning repeatedly argued in favour of very prudent assumptions and the creation of “a contingency reserve.†Manning’s rationale was that when the Department of Finance’s spending and revenue forecasts, and the deficit, were over-optimistic, Canada’s credibility in the credit markets was undermined. Adopting more prudent assumptions, and back-stopping these with the reserve, would begin to restore credibility. Martin adopted both suggestions. Although he presents precisely what were Preston Manning’s arguments, he offers no acknowledgement of Manning’s role.
In his A Professor in Parliament, Dr. Herb Grubel, an economist of the Chicago school and a Simon Fraser University professor who was elected a Reform MP, relates how Paul Martin had asked to meet with Dr. Grubel for dinner whereupon he urged that the Reform Party keep up the political pressure on the deficit issue. Dr. Grubel had argued vigorously and publicly, in the House of Commons Finance committee and in the chamber, in favour of stopping “the vicious cycle†and how to create the conditions for “a virtuous circle†of lower deficits, lower debt-financing charges, lower interest rates for all Canadians, more investment and higher growth, et al. As recounted in Martin’s autobiography, Martin and the Finance department adopted this argument as their own. Dr. Grubel is not given credit nor, even, acknowledgement.
The Reform Party’s chief finance critic, Ray Speaker, led in the creation of an alternative budget, “The Taxpayers’ Budget,†which made these and other arguments in support of defeating the deficit, in writing, and the benefits this could bring to public finances and the wider economy. When Preston Manning “rolled out†this alternative budget, a 57-page document, in late February 1995, to assembled media in 200 West Block, it was a sensation. It also gave considerable political cover and impetus to the Finance minister’s efforts – as the Reform Party’s arguments had been doing for the first year of that Parliament. When Martin tabled his 1995 budget the following week, he did so to considerable acclaim. Yet the Reform Party’s role is given nary a mention, here.
BATTLE PLANS
Martin recounts the beginnings of his leadership campaign after Chrétien’s chief of staff let him know in 1998 that the prime minister was extending permission to the interested parties in his cabinet to begin organizing. Martin’s team, too, pushed him to begin organizing “on the ground,†learning earlier lessons. By 2001, Martin’s team was already sufficiently well-positioned that Chrétien’s chief of staff approached him to convey that the prime minister planned to resign in early 2003. He asked Martin to agree to delay the biennial Liberal convention to February 2003 from 2002 in order to postpone a leadership review. Martin agreed.
Martin rehearses the to-ing and fro-ing between Martin and Chrétien, and the decay in their relations over the leadership question. Very directly, Martin points out Chrétien’s legacy of a poison pill and “a time bomb,†to mix the metaphors. The poison pill was Mr. Chrétien’s campaign financing bill that would force the Liberal Party to shift its fund-raising efforts from a small number of large donors to a large number of small donors. As Martin points out, this was to the advantage of what is now the Conservative Party, since its precursor Reform Party had developed a considerable contact list of small donors. The time bomb was the Auditor General’s report on “ad-scam†– the investigation of public funds for advertising. Martin points out that Mr. Chrétien could have tabled the report before his departure in December 2003, but chose to leave the political problems the report would bring for Mr. Martin’s assuming office as prime minister.
PRIME MINISTER AND DEFEAT
Martin himself notes that a criticism of his premiership was a lack of focus. That instead of focusing on three or four priorities for his government – a practice he followed as Minister of Finance, Prime Minister Martin pursued a Heinz 57 agenda – on the campaign trail and in office.
As a result, Martin narrowly avoided losing power in the 2004 election – reducing the majority he inherited to a minority position in the Commons. By late 2005, he was forced into another general election and lost to Stephen Harper’s Conservatives in January 2006.
"HIGH WATER" OR "LOW TIDE"?
As with most – if not all – political autobiography, Martin defends his record both as Finance minister and as a relatively short-lived prime minister. Even so, throughout his account, Martin is by turns funny and self-deprecatingly ironic. No one can deny that Paul Martin, Jr. emerged from the very long shadow cast by Paul Martin, Sr. That the “Junior†casts his own, very long shadow. But that shadow is mainly about his work in putting Canada’s federal treasury in order – as Minister of Finance, not as Prime Minister. Paul Martin may qualify as Canada’s greatest Minister of Finance, with the sort of stature that the redoubtable C. D. Howe enjoyed as Canada’s Minister of Industry through the 1940s and 1950s. As one former MP and member of the Liberal caucus in both the Chrétien and Martin’s governments put it to me, “Paul Martin was a great Finance minister. But as Prime Minister, he was a disappointment.â€