On Wednesday evening July 22, the continuing heat wave kept the number of guests down, leading once more to a rather intimate salon.

The evening opened with a warm welcome to Susan Eyton-Jones, recently returned from a working vacation in Greece.

The principal topic constituted a continuation of the discussion of the various factors affecting the seemingly endless decline invalue of the Canadian dollar and our dependence on the United States. The Canadian dollar has held its own against currencies other than the American dollar. It has now fallen victim to the success of that currency. This dependence is not likely to change in the foreseeable future. A quick survey indicated that no one present felt that interest rates should be hiked to protect the dollar.
The Canadian dollar has been declining steadily over the past twenty years, because in a global market, our economy is too small to enjoy the productivity enjoyed by our American neighbours. The Americans restructured a long time ago in order to compete with Japan. We have not yet succeeded in doing this.
A solution to that problem is to encourage mergers that will improve productivity and reduce the marginal tax rate. Canada must also offer incentives and tax breaks to encourage productivity.
Others strongly expressed the opinion that it is NOT the role of government to intervene (except through reduction of taxes); government should be as pared down as possible with its activities limited to those services and controls which cannot be offered by the private sector.

(Editor's Note on Intervention and the Brain Drain: Our attention has been called to a recent piece in the Toronto Sun on the imposition of a Departure Tax [a MUST READ]

" More bad news. In October 1996, Ottawa stealthily slapped a whopping new departure tax on any resident who leaves foundering Canada. Heedless of democratic procedure or legal decency, Big Brother in Ottawa made the tax retroactive to 1994. Most Canadians have never heard of this outrageous tax.
Any resident of Canada who leaves must pay or post bond worth 40% of his capital gains on world-wide assets.)

Paul Martin has been effective and has eliminated the deficit. The debt will take care of itself in due course, provided that government maintains a strict policy of reducing costly programs and intervention in the economy where it is not appropriate. It must also be recognized that Canada has benefited from the actions of the previous (PC) government. GST and PST as taxes on consumption are more appropriate forms of taxation than our high income taxes.

Our marginal tax rate is 55% compared with that in Britain at 40%.

In the United States it is much lower still. Bright, young, productive Canadians are attracted to the United States because despite the cost of health care benefits in that country, they retain a much higher proportion of their earned income. For some the difference in quality of life keeps them in Canada, but the loss of a number of our most productive and creative minds does hurt. Our major export is intellectual product. Reducing the marginal tax rate in Canada is essential to our recovery, but would have to be done gradually.

Political instability has had an effect on the value of the Canadian dollar, but this has remained steady over the years and has not accounted in any way for the dollar's continuing decline. In fact, the effect of the political instability on the dollar is calculated at a steady $ .03. However, the politicizing of economic decisions by the government of Québec has hurt this province considerably.

In Québec, fifty percent of the economy is based on government influenced, owned or subsidized business including unions and bureaucracies. Towns like Rimouski are centres of provincial bureaucracy. Too many economic decisions are taken in the light of their effect on the ultimate objective of the ruling party. Bill 188 is a clear example (and stimulated almost no controversy among the media or the voters); it was created in order to enable the Caisse Desjardins to sell insurance despite massive opposition from the insurance industry and brokers. Under Bernard Landry, the Québec government has created a monolithic financial/economic structure which, again, has provoked little if any critical reaction. The discussants were reminded that until quite recently "economics" were referred to as "political economy". Changing the name has not changed the animal in Québec!

Such government businesses as lotteries which do not offer a service in return for money spent, attract no wealth to Québec, but merely circulate Quebeckers' money without adding value. In this climate of political expediency, unlike Ontario which is producing jobs, reducing unemployment and diminishing welfare. Québec has not yet understood that governments are not agents of change and do not create wealth. Change comes from the people.

We still have a largely resource-based economy, and relatively little based on value added. Natural resources account for thirty-five percent of our Gross National Product. This is much higher than that in the United States.

One provocative question "Do we need Canada today; would the inhabitants not be better off if the country split into several smaller, more compatible entities?" elicited response that, despite its woes, Canada is a model country. It is known for its multicultural policies, absence of violence, of serious regional disputes, attempts to right past wrongs. The role of Canada as a medium size power with credibility in the international councils of the world is envied by many and would be hard for others to emulate. (Canada's leadership in peacekeeping, in the UN, OECD, WTO, the very recent agreement on the International Tribunal, negotiations for the Free Trade Area of the Americas….) The problem is perhaps that the Canadian Government has not learned how to capitalize on this role as a means to furthering our economic well-being.

In further discussion of the positive effect of subsidizing Montréal's new baseball stadium, it was hypothesized that to be successful in attracting investment, a city must have major sports teams. Those rejecting this point of view, did so because of the innate disposition of Quebeckers to support winning teams while withdrawing their support of the losers. What would guarantee that the new stadium would generate sufficient revenues to enable Montréal to afford a winning baseball team? Maybe we should turn our attention to soccer?

Stephen Jarislowsky

Monday 27 July 1998 Confiscatory taxation heightens brain drain by STEPHEN JARISLOWSKY Taxation has quite an influence on how one should invest in Canada. Canadian taxes are killing. A 52-per-cent top bracket in Quebec means that, on direct income tax alone, the government gets more from people's efforts than the people retain themselves.

Of course income tax is only the beginning of the plunder of one's pocket. In Canada, we are effectively slaves of the governments. Most well-paid people in Canada probably work nine months a year so that government can buy votes and give poor bureaucratic service. It is the reason our educated young people seek greener pastures abroad. Our third-largest population group, after Ontario and Quebec, is in California (3 million Canadians).

What about Canada's future prospects?

Reported by Herbert Bercovitz and Michael Judson
Edited by Diana Thébaud Nicholson

Tuesday 14 July 1998 Suburbs sue Quebec over downloading Westmount Mayor Peter Trent called the move "tyranny" by Quebec's rural municipalities.

Trent, the former president of the conference, said in an interview last week that Quebec is simply trying to balance its budget on the backs of the municipalities. "In my view, that is not only illegal but immoral," he said. see Trent's No! Show Tuesday 14 July 1998

Medicare is doomed

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