The European struggle to resolve the Euro crisis serves as a strong reminder of how well our own federal system serves us.
Like Americans and Austrians, we have a constitutional arrangement that divides powers and responsibilities according to which level of government is best equipped to deliver them, and each level of government has the political legitimacy to act on behalf of its constituents.
Our national government, centred in Parliament and with ultimate power belonging to the elected members of the House of Commons, has the responsibility for the “peace, good order and government” of the Canadian people.
Our sub-national governments, or provinces, are also elected with the ultimate power residing with the members of the provincial legislatures. Provincial governments typically deliver services closer to the people, such as health and education.
One of the great strengths of the Canadian federalism is that we have systems in place to deal with adverse conditions in any part of the country.
For example, if oil prices soar and send up the Canadian dollar, manufacturing in Ontario is hurt and provincial tax revenues are reduced while social assistance costs rise. But this is offset by equalization payments through which the national, or federal, government in effect transfers tax revenues from have-provinces to have-not-provinces.
Likewise, our national system of employment insurance provides income support to the unemployed so that if unemployment rises in some part of Canada there is a form of automatic stabilizer.
In a nationwide economic crisis, our monetary and fiscal policies can act in tandem. In the recent economic crisis, for example, the Bank of Canada and the federal government together provided economic stimulus in a co-ordinated response. While some Canadians will inevitably disagree with particular policy decisions, there is acceptance that whatever is done has political legitimacy.
This is what is missing in Europe.
The 27-member European Union lacks political legitimacy in its decision-making at the centre. The European Council, comprising the leaders of the 27 member states meets to provide general guidance.
The Council of the European Union, which is comprised of the elected executives — agriculture ministers deal with agriculture, for example — of the 27 member states, is the operating political body, and makes decisions; some require unanimity and some a qualified majority, according to treaties constituting the European Union.
The European Commission is the executive body of the European Union and has its own president — currently Jose Manuel Barroso — who chooses the various commissioners who run the various commissions, on agriculture, industry, research and other such fields. But the European Commission has no power to tax.
There are the 17 European countries that have adopted the Euro — they meet separately on Euro issues and have their own central bank, the European Central Bank. But there is no European finance minister who has the authority to speak on behalf of Europe or manage overall fiscal policy for Europe.
There is the European Parliament, with members elected from the member states, but with no powers to originate legislation or to tax. It exists mainly to approve or reject the European Union budget, financed principally by contributions from member states, confirm initiatives of the European Commission and the appointment of the president of the European Commission.
In the current crisis, the European Central Bank can set monetary policy and use its powers to provide liquidity to the system. But unlike Canada, there is no system to provide automatic fiscal transfers to bolster regions in crisis or use the tax system to address economic needs. Moreover, there is no way in which this can be readily provided because there is no political institution capable of doing this.
Instead, we see a succession of frantic negotiations among European members, each of which has to respond to its own electorate. Because decisions are difficult, they are delayed.
There is not a European or Eurozone electorate in the sense that there is a Canadian electorate. What the current crisis in Europe demonstrates is that the Europeans have to move to a federal system, like ours, or something similar, which gives political legitimacy to Europe as a union.
While Canadians may legitimately feel that the Constitution Act of 1982, based on the British North America Act of 1867, does not fully meet the needs of the 21st century world, we have a political system that works and that balances national and regional interest. Europe needs to become more like us.
Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.