THE aggressive clamor of French Canadians for a special place in the Canadian sun is arousing the animosities and counterclaims of other ethnic minorities all across the country. As a result, Canadian preoccupation with American domination, American economic and cultural penetration, and American foreign policy has ebbed to the lowest point in a decade. This fact is sharply etched by contrasting the 1963 and 1964 budgets of Minister of Finance Walter L. Gordon.

The steady growth of American ownership of Canadian industry aggravated Canadian-American relations throughout the Diefenbaker Administration between 1957 and 1963. When the Liberals, under the leadership of Lester B. Pearson, turned out the Diefenbaker Conservatives in April, 1963, everybody hoped that friendly relations would be restored. The fundamental problems of the Canadian economy, however, have always tended to submerge the differences between political parties. There is nothing more fundamental than $20 billion the size of U.S. investment in Canada.

In selecting Gordon as Minister of Finance, Prime Minister Pearson chose a brilliant Toronto business consultant who is also one of the country’s pioneer worriers about American control of Canadian industry. Gordon’s other main worry was Canada’s headlong rush into debt under the Diefenbaker government. His first budget bravely tried to put a halt to both. He proposed to levy a 30 percent “take-over" tax on sales of shares to foreign interests when the purchase was made to gain control of any company. He also proposed to double the withholding tax on the profits of American subsidiaries until 25 percent of the capital stock was sold to Canadians. To bring the budget closer into balance, he made all construction material and all machinery of production subject to Canada’s 11 percent sales tax.

It was quickly demonstrated that Gordon s take-over tax was unworkable. The business interests which had supported the Liberals “to get rid of Diefenbaker” deserted Gordon in droves. The construction industry joined the manufacturing industry in outraged protest. Gordon was forced to withdraw his take-over tax and stretch out the application of the sales tax. The process of American absorption of Canadian business has continued. The budget imbalance reached $700 million in 1963, and a smaller deficit is forecast for 1964. Nevertheless, Gordon brought in a completely standpat budget for 1964, which made no important change in anything except to cut the withholding tax on American-subsidiary corporate profits from 20 percent to 15 percent.

French separatism in Quebec

The best explanation for this complete reversal of form is that the Pearson Administration hopes to buy another year in which to find solutions to the country’s internal difficulties. Of these, the outbreak of French separatism in Quebec is the most ominous. It is significant that even before Parliament passed the budget, Pearson and Gordon led a federal delegation to Quebec City for a conference with the premiers of the ten provinces. The conference, the latest in a long series of interprovincial palavers over tax sharing and welfare responsibilities, settled very little. The concessions obtained by the other provinces failed to satisfy Quebec. Its refusal to participate has delayed the adoption of a comprehensive national pension plan. Pearson’s announcement after the conference that the federal government would put the plan into effect without Quebec has set Ottawa and Quebec City on a collision course.

As relations between Ottawa and Quebec deteriorate, the problem of French separatism deepens. Unless this crisis is solved, it may lead to the destruction of Pearson’s Liberal Party and turn Canadian politics into a bitter contest between English-speaking and French-speaking factions. Pearson’s problem is complicated by the fact that he heads a minority government. In a House of Commons of 265 members, he has only 129 members. The Conservatives have 95, a strife-torn Social Credit Party 24, and the New Democratic Party 17. Only the divisions in the opposition ranks keep the Liberals in power.

French Canadian nationalism in milder form has been a vexing problem of Canadian life for more than fifty years. French Canadians account for 5,500,000 of Canada’s population of 19,000,000, and of these, three quarters live within Quebec Province. Quebec itself has a population of 5,000,000, made up of 3,254,000 who speak nothing but French, 600,000 Anglo-Canadians who speak nothing but English, and 1,338,000, mostly French Canadians, who speak both languages.

Canada’s financial capital

The English-speaking Canadians live mainly in Montreal, where they dominate the industry, commerce, and finance of the province and, to a large extent, of the country. Only since World War II has Toronto seriously challenged Montreal as Canada’s financial capital. Montreal is home for both Canadian railways, for two of its largest banks, for its great insurance and mortgage companies, and for 2,000,000 people. Until World War II, French Quebec was prepared to leave most of industry, finance, and commerce to the English. Predominately rural, farm-oriented, French Quebec was parochial, introverted, and isolationist. It participated hardly at all in the First World War and as little as possible in the Second.

World War II ended the rustic idyll. Young people from the farms and villages flocked into the cities by the thousands to take jobs in war factories and in the vast industrial expansion of the post-war era. Few were equipped by education or training for modern industry.

Until this year when the provincial government took over, education in the province was still controlled by the Roman Catholic Church. Its goal had been to train people for the Church, for politics, and for the law, not for business or science. Large families and low income forced many children out of inadequate schools with only a smattering of knowledge. They came into the labor market further handicapped by inability to speak English. It was small wonder that the betterpaying jobs in Quebec industry went to the English Canadians, that the French Canadians were the last hired and first fired and got all the dirty work to do.

For two hundred years, French Quebec sought to maintain its own culture and language by isolating itself from the main currents of English Canada. Similarly, the EnglishCanadian minority sought to maintain its independence by holding fast to the English language and isolating itself from French Quebec. It was able to do so because the language of commerce was English. Where bilingual employees were required, as in department stores, hotels, public transportation, it was the French who had to learn English. It was a galling experience for raceproud young French Canadians to have to give up their native language in order to survive in their own country. Every time they had to answer a customer in English, they were reminded of their inferior status.

Lesage’s reforms

For two generations Quebec has been governed provincially by a succession of corrupt, Tammanylike administrations. The last fell apart after the death of Premier Maurice Duplessis in 1959. For fifteen years, the Duplessis regime had kept a “states-rights” campaign mounted against the “centralizers” in the national government in Ottawa.

A new group of dedicated Liberal reformers headed by Jean Lesage and René Levesque swept into power on a wave of patriotic fervor in 1960 that somehow synthesized the age-old pent-up resentments of French Canada. They promised not only to put an end to corruption, which they did miraculously, but to build, within Quebec, a great industrial commonwealth in which French Canadians would find full scope for their ambitions. To achieve this, it would first be necessary to force Ottawa to grant Quebec fiscal autonomy, so that the money being taxed out of Quebec by Ottawa would be spent in Quebec by Quebec.

Quebec fell into step behind the reformers, but when the march toward Utopia slackened, groups of student-led extremists got into the act. Separatist sects sprang up, and violence broke out. There was an epidemic of mailbox bombing that terrorized Montreal, war memorials were desecrated, armories were dynamited, and arms depots looted.

In the meantime, the Lesage government threw its full weight behind the drive for a better deal for French workers. The combination of violence and government pressure got the message across to English-speaking Quebec industry.

There followed a lot of frantic hunting to find French Canadian vice presidents to improve corporation images. Personnel policies were revamped to open avenues of promotion for French Canadians. Top executives were ordered to join in crash programs to learn conversational French. The language barricades around the English enclave began to come down. Between the accession of the Lesage Liberals in Quebec in 1960 and the success of the federal Liberals in 1963, a good start was made in righting some of the ancient wrongs in Quebec.

Squabbling over revenue

The Lesage drive for Quebec fiscal autonomy, however, bogged down. Under the Canadian constitution, the provinces are responsible for all educational and social welfare services, but their taxing powers are limited to direct taxation. The dominion government is unlimited in its taxing powers and is consigned no social responsibility. To finance needed social services, the system worked out has been one of sharing costs, with the dominion bearing the larger share and the provinces handling administration. The rich provinces, particularly Quebec, have campaigned to have the dominion vacate all or part of certain tax fields, such as income and corporation taxes, so that the provinces can finance their own welfare schemes. The poorer provinces reject this proposal; they want large subsidies from the dominion.

For more than thirty years the provincial governments have been squabbling with the federal government over division of revenue sources and social responsibility. Out of these agitations have come a succession of compromises for sharing revenues and responsibilities which satisfy nobody, and a patchwork of welfare services with costs shared between Ottawa and the provinces. The system is a product of necessity. The taxable profits from Canadian big business drain into Quebec and Ontario, where so many of the head offices are located. This drainage shrinks the taxation base of eight provinces and expands that of the two central provinces. Without Ottawa functioning to spread the wealth around, some of the “have not” provinces would be unable to maintain a decent level of social services.

New tax deal for Quebec

Immediately following the 1963 general election, in which Premier Lesagc supported the Liberals, he announced that he was giving Ottawa one year to come up with a new tax deal for Quebec. When the Pearson government proposed to enact a national social security scheme, which Canada now lacks, Lesage declared that Quebec would not participate. Nor would it accept federal aid for education. Nor would it accept a national health scheme. It wanted “fiscal autonomy,” the return to Quebec of “its" tax sources, so that it could finance its own welfare schemes.

Naturally, the Pearson Administration could not accede to Quebec’s demands without provoking all the other provinces. Instead, it sought conciliation by a passionate courtship of French Canada. It launched a royal commission to encourage the spread of “Bilingualism and Biculturalism” across the country. All the federal government publications and releases are now printed in both English and French. So are all the tax forms and official documents. The publicly owned Canadian National Railways is being bilingualized, along with the civil service. The name of Trans-Clanada Airlines is being changed to Air Canada, and its timetables are printed in English and French. The Canadian Broadcasting Corporation is scouring the hinterland for announcers with French accents.

Wanted: more French

Far from mollifying Quebec, the Pearson appeasement program seemed to have made everything worse. René Levesque, the leader of the immoderate wing of the Lesage government, has repudiated the bicultural commission. Quebec wants the Canadian constitution to be rewritten to recognize Quebec’s proper “national” status. Quebec, Levesque and his colleagues insist, is not like any other province. It is an equal partner in confederation and hence equal to the whole of English Canada. French Canadians have a right to have their children taught in French everywhere in Canada, Levesque has asserted. What French Canada itself wants is less bilingualism and much more French.

Nothing could be better designed to arouse the anger of the rest of Canada. West of Ontario, the French language is never heard. Canadians of Ukrainian and German origin far outnumber French Canadians there and regard the whole bilingual uproar as a personal affront. So do a dozen other racial minorities in the west, to say nothing of the majority of British stock. To many thousands of Canadians, particularly in Ontario, “French” has been a dirty word since the failure of Quebec to support wartime conscription. Most of the wartime sores, however, were slowly healing when the violence broke out in Quebec.

The saving grace in the Canadian situation is what Joseph Stalin once called the logic of things. Despite the separatists, who now number one out of eight in Quebec, Canada cannot exist without Quebec, and Quebec cannot exist without Canada. Everything is against separation; commerce, industry, finance, and transportation are so inextricably interwoven that untangling the Quebec parts is impossible. This, if nothing else, will keep the country together.

It is at the moment difficult to draw any firm conclusions. There is no way of telling whether Canada is at the beginning of a crisis of historic proportions with Quebec or simply reaching the end of another chapter in the continuing story of mutual vexation between French Canada and English Canada. All that is certain is that Canadians are a lot more concerned about their own problems and are worrying a lot less about their neighbor.