IN 2006, ALL GOVERNMENTS WERE staking out their positions on the renegotiation of the equalization formula. Most provinces wanted the program expanded, but Ontario had publicly stated that federal programs, like equalization, that drained money from Ontario to support other provinces were unsustainable for the Ontario economy. In an attempt to come to an agreement among provinces, a series of premiers' meetings was convened. The general consensus amongst provinces at these meetings was that Ontario should transfer more money to other provinces. Premier Dalton McGuinty refused to acquiesce to this consensus and, for his troubles, was lectured by other premiers for being stingy and un-Canadian.
One premier chastised McGuinty for failing to fulfil his assigned role of Big Brother of Confederation. "You're letting the family down," he said, shaking his head. Thankfully, even to a premier with nine siblings--or perhaps because of it--McGuinty saw this as the maudlin claptrap it was, part of a long tradition of the shakedown emanating from some provinces, where political success depended largely on one's ability to extract more money from Ottawa--which mostly came from Canadians in Ontario.
During those meetings, a senior government official from outside Ontario helpfully explained to me that Ontario could in fact fund more generous transfers to other provinces if Ontario would "just raise your property taxes by a couple of percentage points." I tried to imagine an Ontario politician making that case to Ontarians on the stump: "We're raising property taxes, but don't worry--it will ensure that other provinces can keep their university tuitions way more affordable than we can here! I hope I can count on your support!"
In 2006, political leaders and policy makers did not yet know that they were dealing with a New Ontario, a province less willing than in the past to see the appeasement of other provinces as core to its interests and one where the citizens are more willing to support muscular political leaders who stand up for the province. The New Ontario is less confident in its economic future than the Old Ontario, but it also has global ambitions, believing its prosperity in the present century will be determined far more by its competitiveness on the global stage than by its ability to placate other provinces.
The New Ontario will produce a political shakeup in Canada. A new national politics will emerge, one that either reconstructs our social policy architecture and federal fiscal relations so that they work better for Ontario, or that sees Ontario join with Alberta and Quebec in demanding greater provincial autonomy to run its own social programs with its own fiscal resources.
The assumption that Ontario is prosperous while other provinces are not is embedded in the Canadian DNA and the design of our major policy frameworks. That assumption is no longer true--and has not been since the 1990s--but it takes a while for the political culture to change. Gradually, though, a new understanding is developing.
Symbolically, the fact that Ontario received its first ever equalization cheque in 2009 helped crystallize that change to the country, even though Ontario's qualification for equalization is largely technical, the result of a flawed formula.
Receiving equalization does not mean that Ontario is now poor, nor does it mean that Ontario now gets more from the federal government than it puts in (Ontario, Alberta and British Columbia remain the only three provinces to be net fiscal contributors to the federation). It does mean that provinces that once needed Ontario's fiscal help no longer do. It is also hard evidence that Canada's "business model" of the latter half of the 20th century--that is, the federal government helps Ontario manufacturing prosper and in return Ontario redistributes much of its wealth to poorer regions that then buy back Ontario's manufactured goods--is defunct. …