Betting on Canada

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Betting on Canada—Plan A or Plan B?

Gordon Gibson

How would you figure out how to bet on Canada? Will the country survive the next couple of years, or will it break into two pieces, or possibly more? We will have to face this question for the foreseeable future, until it is resolved, one way or the other.

The answer matters to all of us. Yet our political leaders simply will not rationally discuss the probabilities. We will have to do that ourselves. This is a guide to how to think through the question and calculate the odds—an experience that may help contribute to ways to change the odds.

This guide is written particularly for people outside of Quebec. Quebecers are old hands at this, but even readers inside that province may find a surprise or two in these pages.

Writing scenarios

A scenario is a story about the future. You think carefully about how events might unfold, and write it down. Writing scenarios is one good way to think about what could happen—for an individual, or for an organization, or for the whole country. Scenarios are different than dreams, and often less pleasant. Dreams are often fuzzy, and express our hopes. A well considered scenario tries to be precise, taking even inconvenient facts and possibilities into account.

In writing a scenario, you try to be realistic, and guess not at what you hope, but your "best guess" at what you believe will happen.

Of course many things could happen, so to have a good chance of describing the future even in general terms, several scenarios are usually required. Often there will be forks in the road—points where events will move in one direction or another, depending on something that just happened. (A "Yes" or "No" on a referendum is a perfect example. You have to construct a different future for each case.)

New information today may change a lot about your scenarios for tomorrow. Winning a lottery might change your vacation plans, and so might an airline strike. So scenarios have to be constantly updated. They are just the best guesses we can make on any given day, with the information at hand. And because no one knows which scenario will come true, we can assign probabilities to each one. In this way, we can guess at the future.

Dividing up the future

The political future of Canada over the next couple of years can be divided into three main streams leading up to the next Quebec referendum. These are the "surprise-free A surprise-free scenario is one in which all of the principal actors and forces continue to act pretty much as they have in the past. -Note scenario," the "winning federalist initiative" path, and the "inconclusive" or "neither side a winner" outcome. Each of these is described in greater detail in what follows. (Naturally, even this three-pronged categorization is only one opinion, so you may want to make provision for other starting scenarios, according to your imagination.)

Click here to view Figure: Worksheet

The scenario-writing tool kit then advances through different possibilities, or "branches," When all of these branches are drawn out on a chart, the result looks like a tree, blossoming into the future. Some analysts call this a "game tree" or a "decision tree." -Note as the future unfolds. Each of these are outlined according to the main possibilities as we see them, and we also always make provision for whatever "other" path you may wish to add. However, if you do add other paths, you will have to invent your own set of considerations to think about when you assign probabilities.

For the main branches, you are asked to estimate how likely or unlikely you consider that particular outcome. A list of things to think about is supplied, and after you have done that thinking, you are asked to assign probabilities to each branch.

A "probability" is just the odds that something will happen. If you toss a coin, the chances are 50/50 (over the long run) that it will come up "heads" or "tails." Thus, we say that the probability of heads is .5.

If you roll a pair of dice, there are 36 possible outcomes. (Each die can come up on any one of six faces, and 6 X 6 = 36.) But there is only one chance in 36 of rolling a "2" or "snake-eyes" and the probability of this event is therefore 1/36, or about .028.

When we are guessing about political futures, we can't pretend to be so precise. Just give it your best guess. If you think there are about 4 chances in 10 of Lucien Bouchard getting a "Yes" at the next referendum, then assign the probability of .4 to that event.

There is only one absolute rule. The probabilities that you assign to all the possibilities have to add up to 1.0. After all, while we may not know what will happen, we know for sure that something will happen, and a probability of 1.0 equals certainty.

On the worksheet that comes with this guide, you will see a sideways decision tree, with each potential event labelled, and a box for you to enter your estimated probability. You can then calculate the probability of the event at the very tip of that branch by multiplying all of the probabilities on the way to getting there.

Thus you will arrive at your very own calculation of how likely you think it is that Canada will remain intact, break in two, or break into more parts. You may be surprised at the result!

More importantly, you will gain an insight into the forces pushing in one direction or another, which may give you ideas as to how the odds might be shifted in more advantageous ways. Of course, different Canadians will have different ideas as to what is "advantageous" from their point of view.

The pages that follow give a brief outline of each branch in the decision tree. To provide a good overview, the description of the relevant factors is brief. However, in many cases, you may want to discuss the factors further before assigning your probabilities.

Your own perspectives and those of your associates will add a lot to this because, in politics, what happens depends a great deal on what people believe.

Good guessing!

The three opening scenarios

Simply put, Canada will go one of three ways. The federalists will win and put the matter to bed, or the Quebec sovereigntists will win and split the country, or neither force will be able to prevail for the foreseeable future.

Each of these possibilities will be judged in the next Quebec referendum, unless resolved earlier by a negotiated agreement among the players, or a pre-emptive federalist referendum which would probably be national in scope.

We first describe these initial scenarios in greater detail, and then suggest questions to consider before assigning probabilities to them.

The surprise-free scenario: The Sovereigntist Forces Win The Next Quebec Referendum

The "surprise-free scenario" concept was invented by Herman Kahn at the Hudson Institute. It provides a baseline case, and asks the following question: "How does the world unfold if all of the actors and forces just keep acting in the same way?"

Now, we all know that the world is never "surprise free," because we cannot foretell the future. On the other hand, a continuation of past trends does provide the best guide to the future, especially if we are perceptive in understanding those trends.

The surprise-free scenario for Canada begins with the referendum result of October 30, 1995. It notes the momentum of the sovereigntist forces, and the fact that they are well led, with a single command structure. They have a well-articulated plan.

In addition, through control of the government of Quebec, the sovereigntist forces control the major fraction of the political agenda. They also largely control the "spin" given to events in the Quebec media, as they have by far the most powerful spokespersons.

This scenario notes that the federalist forces are not well led, and they have been uncertain and even counter-productive in their reactions to the October 30 event. Moreover, the federalist forces have neither a single command structure, nor a coherent plan. There are other important variables of course, financial and otherwise, and these will be elaborated later.

The winning federalist initiative: Federalist Forces Present an Initiative Which Clearly Ends the Separation Threat

Federalist forces in Canada retain powerful options. In particular, they have the ability to propose changes in the federation that would dramatically reduce the percentage of Quebecers opting for separation.

They face serious constraints, however. The federalist forces are led by several governments, and must take into account a broad constituency of divided opinion across the country, vis � vis any given initiative. (Witness the divisions around "distinct society.")

On the other hand, the federalist side has the powerful forces of inertia (people, including Quebecers, are innately conservative), and control of the Bank of Canada.

Any winning federalist initiative would have to be endorsed either by agreement with the government of Quebec after negotiations, or by way of a clear win (in Quebec and elsewhere) in a pre-emptive referendum.

A success along this line would mean no Quebec referendum on separation in the foreseeable future. Any lesser federalist initiative that does not meet this test (as, for example, the weak Ottawa package of December 1995) does not belong in this scenario, but rather falls into scenarios 1 or 3.

The inconclusive scenario: Neither Side Wins and the Struggle Continues

This is the unhappy world of Jacques Parizeau's "never-ending visit to the dentist."

In this scenario, neither the sovereigntists nor the federalists are able to gain the clear upper hand. Uncertainty continues in Canadian politics and the economy, and the issue continues to absorb the main energies of our leaders in an unproductive way. Much government activity is dictated purely by its impact on the unity file.

This scenario may or may not be marked by another referendum at some point, or indeed by a series of "neverendums."

Other

You may feel that there is a significant possible path that is not captured by any of the above scenarios. In that case, you may wish to describe it in the space below.

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The first branch point, or "fork in the road"

At some point, one of the above scenarios comes to describe the unfolding world. If there is a "Yes" in a Quebec referendum, we will look at one new set of scenarios. (We do not assume that "Yes" automatically leads to separation; simply that it is a branch point for new possibilities.)

If there is a winning federalist initiative, then that is the end of the decision tree for our present purposes. No doubt the initiative would have very large consequences for the future shape of Canada, but our territorial integrity and legal continuity would no longer be in doubt.

Even if neither side is a winner, at some point even that scenario will have its own branch point. One of the branches is simply that the uncertainty continues. In particular, if there is another close "No" referendum, we recycle back to the first three scenarios, though with changed probabilities. But the "neither side a winner" branch could also split in two other directions. One we will call "the Irish result." The other is "erosion of will."

We will proceed now to consider life after the first branch point, taking scenarios 1, 2, and 3 in that order. We will then follow the subsequent results of each.

Scenarios following a "Yes" vote in a Quebec referendum

If the "Yes" side wins a referendum, the parties either make a deal, or they don't. (We leave open for the moment who negotiates for ROC, the Rest of Canada.) If there is a deal, that is one thing. If there is no deal, then Quebec either proceeds with a Unilateral Declaration of Independence (UDI), or it gives up.

If Quebec just gives up, life will go on. If there is a deal, or a UDI, Quebec will separate, and we will be in a whole new world. We will then have to consider whether ROC survives, or breaks up itself.

Note that one reason for no deal could be that ROC refuses to negotiate. And it may refuse because it is unable to do so (ROC does not exist, and has no leader, and no decision-making machinery. The existing Parliament with 75 Quebec MPs and a Quebec prime minister might not be able to function effectively.) On the other hand, ROC might decide to stonewall as a deliberate strategy.

Quebec then chooses the next branch. It will either fold, and give up on sovereignty, which ends the matter, or declare a UDI. After that, ROC will once again have the same two possibilities of holding together, or breaking up.

These scenarios between them seem to completely exhaust the logical possibilities after a "Yes" vote.

ROC either negotiates, or it doesn't. There is either a deal, or there isn't. Quebec declares a UDI, or it doesn't. ROC survives or it splits. Some of these results can be arrived at by different paths, but at the end of the day, and after assigning probabilities, we will be able to assess the chances of Canada surviving after a "Yes" vote, or the chances of Canada splitting but ROC surviving, or of a split-up of ROC itself.

Scenarios following a winning federalist initiative

As indicated previously, if a federalist initiative wins, there is nothing further to consider here, in the sense that Canada continues. The nation will almost certainly be dramatically changed, given the expectations in Quebec (and the West) that will have to be accommodated, and that is a very interesting exploration in itself. From the point of view of the dangers of discontinuity, however, these dangers would be over. Canada, in some form, would be preserved with boundaries intact.

There are a number of factors to explore in thinking about this outcome, and they are reviewed later in the detailed section on assigning probabilities.

Some of the questions are

•What would have to be proposed to Quebec in a pre-emptive initiative in order to end the sovereigntist thrust?

•What is the likelihood of our leaders (at any level) proposing such an initiative in a timely fashion?

•Even if our leaders were willing to do this, would they obtain the necessary support in the country?

•If our leaders were not prepared to move in this direction, is there any other institution or citizens' group that might be able to do so—"people-to-people" initiatives, etc.?

Scenarios flowing from an inconclusive future where neither side is a winner

Scenario 3 describes that grey, in-between world where the sovereigntist and federalist forces struggle on, neither side gaining the upper hand. There may be specific milestones along the way—for example, another Quebec referendum yielding another 49 percent "Yes," but no clear winner.

Moreover, there may be no early milestone at all. The forces may be so closely balanced that neither dares to call a definitive test. However, other things will be happening. Opinion polls will continue. Budgets will happen. The federal-provincial wars will continue with whatever armament is conveniently at hand. And there will be both federal and provincial elections.

We need an analytical tool to deal with this amorphous Scenario 3, which is in many ways the worst of all worlds. It has to be transitional; an equilibrium must eventually be found. The trouble is, "eventually" could be a long, long time.

The device we adopt to deal with this is to posit three possible outcomes, of which the first describes a circular pattern, i.e., "more of the same" just goes on and on. In this situation, no conclusive resolution is apparent. Therefore, we cannot define any specific "outcome" to which to assign a probability. However, we do know that at some given time—one, two, five, or ten years hence—matters will be resolved. Nothing remains uncertain forever.

This is a bit like the situation that pollsters face when they get an "undecided" response. They generally deal with this by assuming that when the "undecideds" actually make their decision, they will divide up along approximately the same lines as those who have already made a choice.

We can use the same technique here, and whatever probability you finally assign to the continuing "more of the same" possibility, we can divide up on the basis of the probabilities that you have assigned to the defined outcomes.

But there are two other outcomes of Scenario 3 that are in fact definitive.

First is the Irish solution. At the beginning of this century, Irish nationalists were locked in an ongoing battle with Great Britain for the independence of the Irish Free State. Ireland sent an extremely disruptive group of separatist MPs to the Parliament in London, election after election. The work of these MPs, combined with unrest continually generated on the ground in Ireland, finally wore down the will and patience of the British. In 1921, Ireland was granted independence, just to get rid of the problem. (Ireland continued to use the British pound until 1927.)

If the Quebec separation issue continues inconclusively and expensively for long enough, ROC may conclude that the Irish solution is appropriate. (There are some very large differences, of course, which will be noted.)

After an Irish solution, the question as to the continuity or breakup of ROC would still exist. The difference in this scenario is that there would have been time to think about it in advance.

The third possibility in the "neverendum" branch of the future is that the sovereigntists give up. This scenario describes a gradual erosion of will. In other words, people just get tired. In a sense, the Irish solution is an erosion of will on the federalist side. But the same thing could happen on the sovereigntist side, though with very different results. The one leads to the end of Canada; the other to its grudging continuity. But either way, the decision tree ends.

This concludes a general description of the scenarios. On the next page is a diagram of the decision tree, along with boxes for you to enter your assignment of probabilities for each branch.

Note that there are letters at the lower left-hand corner of each box. All of the boxes of any given letter have to add up to a probability of exactly 1.0. If you don't think the boxes listed capture all of the possibilities, add others of your own, but remember: the total of the probabilities at each stage of each scenario must still add to one.

In each case, the final probabilities show up in the box at the far right. The branches where Canada survives are marked by three vertical lines (|||) and those boxes with a black dot (•). The boxes where Quebec leaves but ROC survives are marked with a black diamond (�). The boxes where Quebec leaves and ROC splits up are marked with a black square (•).

What follows is a more detailed list of the factors you may wish to consider in assigning your probabilities.

Considerations in assigning probabilities

As we work our way through the scenarios, we want to assign a probability to each one. After all, if there is almost no chance of something happening, we won't worry much about it. (Of course, in some cases, we really should worry about improbable things like house fires or earthquakes, even if they are rare, because they are so cataclysmic if they do happen.)

Thus, for example, we would like to know how probable it is that in the future there will be a referendum in Quebec that will yield a "Yes" vote for separation. To guess at that, we will have to consider a whole host of factors that could influence that outcome, and think about each one of them.

This section of the guide sets out some of the more important questions to think about.

Scenario 1: "Surprise-free," leading to a referendum "Yes"

•Why did 49.4 percent of Quebecers (about 2,300,000) vote "Yes" last time? Which of those trends are moving, and in which direction?

For example, we know that older people are more likely to vote "No." But it is now also believed that this does not relate to their actual age, but to the years during which these people grew up. It may be that although the population of Quebec is aging, it is, for now at least, growing more separatist for that reason, as the older federalists die.

•What is the impact of unemployment, which was quite high in 1995? Are people more or less likely to vote "Yes" if they don't have a job, or are worried about it?

•What about the urban/rural split? Montreal and Quebec City voted "No," even in many francophone districts.

•What about migration of anglophones/allophones (who tend massively to vote "No") out of Quebec in the post-referendum period?

•A fundamental determinant of referendum behaviour is a worry or a comfort with the security of the French language and culture in Quebec. What are these trends?

•It is widely believed that the government of Quebec will have to get its finances under control by very painful cost cutting. Will people blame this on Quebec City, or on Ottawa? Are people prepared to suffer pain and pay a price for sovereignty? How much?

•Do voters understand the economic issues involved?

•People vote based on both hope and fear. How important is the mix, and what is it in Quebec?

•How much does leadership matter, and how does the leadership of the "Yes" and "No" sides compare?

•How good is the morale of the political troops on each side?

•Will there be a general election in Quebec before the next referendum? How will this affect the probability of a "Yes" vote?

•Will there be a federal election or a major change in Canadian leadership before the next referendum? How would that affect the probability of a "Yes" vote?

•How likely are important signals from money markets, such as the value of the dollar and interest rates? Such economic signals can be very important to many people. Unlike politicians' statements, these are statements by neutral, uncaring markets. Moreover, money markets hugely affect people's lives, from the ability to vacation in Florida (with a falling dollar) to the ability to service a mortgage or buy a car at high interest rates.

Despite the fact that the polls showed that the last referendum was too close to call, financial markets hardly moved. Why was this? Were they out of touch? Will it be different next time, or if the "Yes" polls start to rise significantly?

If financial markets do deteriorate, who will Quebecers blame—their government and the sover-eigntist forces, or Ottawa? Will the reaction be to back off sovereignty to stabilize the situation, or to get out of Canada as quickly as possible for the same reason?

•Will any of these money-market signals be directed at Quebec specifically, in a vote of non-confidence? Quebec has to borrow money continuously to finance its deficit, and also has a large volume of bonds outstanding that are regularly traded. Thus it will be quite clear if there is a deterioration of confidence in the financial status of the province.

One of the very important signals on this issue is whether the new Premier Bouchard will be a fiscal conservative in general, and particularly in his first budget.

•Will the federalist forces be prepared to make the major changes required to strip away a significant number of "Yes" voters? (This issue is more fully explored in the notes to Scenario 2.)

•Do the people planning to vote "Yes" really want to separate, or do many of them consider it like a "strike vote" designed to push for change in Canada without actually ending it?

•Will there be any policy problems over the next year or two that will anger Quebecers? Will some political leader make an inflammatory statement, or will there be another flag-burning incident?

•The federal budget will almost certainly continue with major cuts in programs that currently benefit all of the provinces, including Quebec. Will this be seen as necessary fiscal restraint, or one more reason why Canada is of declining usefulness to Quebec?

•Investment in Quebec is at a standstill, and some businesses are moving out. Will the tendency be to back off sovereignty and hope this changes things for the better, or push forward to gain control of the economy as quickly as possible?

•What about the signals sent by aboriginals in Quebec? Will they gain external support that will worry "Yes" voters, or will these signals increase the determination of Quebecers to fully control their territory?

•What about the signals sent by voices in the rest of Canada, such as the Reform Party's proposals on terms of secession (including referendums to partition off those sections of the province that vote "No.")

These are just some of the many points to consider when you go to assign a probability to the first box on the worksheet. But consider the other two initial scenarios before you begin.

Scenario 2:

A winning federalist initiative

•What would it take to generate a strong, positive response by many current "Yes" voters to stay in Canada?

•To the extent that the proposals relate to decentralization, how far do you think they should go, or would need to go for this purpose?

•To the extent that the proposals need constitutional amendments to be implemented, do you think that is possible in Canada today?

•Do you think that a winning federalist initiative would have to include some kind of special status for Quebec? If so, what, and how much? Do you think the rest of Canada would agree to this? Would your province?

•Do you think that Quebec will insist upon a "distinct society" recognition? What do you think that means? Is it just symbolic or, if not, what is its substance?

•Most Quebecers appear to want a veto on any constitutional change if the province stays in Canada. Do you think this would be agreed to by the rest of Canada as a constitutional change? (The federal government move to "lend" its veto to Quebec can be repealed at any time by any successive federal government. Therefore, most Quebecers who think about such things want the veto in the constitution itself.) However, to change the constitution in this way would require the unanimous approval of the provinces. Do you think this would be achievable?

Immediately following, you will find some of the things that might be put on the table in a federalist proposal for a restructured Canada.

•If you wish to consider the details set out there, how far do you think the country would be prepared to go?

To illustrate, over the years, there have been many proposals for restructuring Canada. These come in two main categories: the reallocation of powers between federal and provincial governments, and other constitutional change. Some people believe that the provinces are not the right place to put transferred powers. They suggest that we should be looking at the city-state concept or at privatization. In any event, the powers usually up for consideration include some or all of the following:

a)Federal withdrawal from generally provincial responsibilities:

•Regional development

•Tourism

•Housing

•Youth

•Sport

•Mining

•Energy

•Manpower training

b)Federal devolution of management, and perhaps actual jurisdiction, over

•Fisheries

•Unemployment Insurance

•Aboriginal affairs

•Transport

•Coast Guard

•Corrections

•Agriculture

c)A greater provincial voice, perhaps extending to veto, in

•Immigration

•Appointments to the Bank of Canada, the Supreme Court, and other important central bodies

d)Provincial control over

•Language

•Federal "spending power" (This would mean an end to federal standards in all areas of provincial responsibility, including health and social services, making them essentially the same as education is now.)

e)Special powers for provinces to preserve, protect and enhance their cultural distinctiveness.

In addition, constitutional amendments are often discussed, including:

a)The formal constitutionalization of any of the above; and

b)A change of the existing constitutional amending formula to implement a veto, in some or all areas, for one or more provinces

•Any restructuring plan—the above, or any other, no matter how small—must have the approval of the federal government. Do you think that the federal government is prepared to consider the kind of change needed to bring about a major decline in the "Yes" vote?

•Do you think that there will be any effective leadership on this issue outside of Ottawa? The premiers? Which ones? Could they work together? Is there anyone else?

•How likely is it that citizen initiatives could have any effect on this question?

•Is there any time or role for an elected constituent assembly?

Constituent assemblies are bodies elected or appointed to draft or redraft constitutions. The recommendations are then normally (but not always) subject to referendum or legislative approval.

The constitution of the United States was written in this way, as were those of Australia, West Germany, Spain, and many of the smaller countries of the world. The recent South African miracle came about through a non-elected (but highly representative) variant of this device.

•One way that agreement with Quebec could be reached would be by negotiating with its current sovereigntist government. However, any such agreement would almost certainly involve a version of sovereignty association, where Quebec would become a separate country with especially close links (including political links) to Canada. Do you think that Canadians would support such a solution rather than a complete break?

•One way that a federalist initiative, less far-reaching than sovereignty association, could by-pass the Quebec government would be to put a version of a restructured Canada in a referendum to the whole country, including Quebec. Do you think that could work? What would be the chances, and what would the package have to contain?

•Another proposal for bringing cold reality to the situation is to prepare a "terms of secession" package, which might simply be presented to Quebecers by Ottawa, or perhaps validated by a national referendum first. Some of the versions are very hard line, and designed in part as a negotiating tactic to frighten, and deter. Others are merely realistic. Do you think that such an initiative could put the problem behind us?

•Overall, to succeed, a winning federalist initiative (which puts the issue squarely behind us) has to be credible in Quebec (in the sense of being believed, after what are seen as the betrayals of 1982, Meech Lake, and the Charlottetown Accord) and acceptable, both in Quebec and the other provinces. Do you think that this is possible?

Scenario 3: neither side a winner, no resolution, "neverendums"

•What are the chances of the federalist initiatives improving just enough to halt or slow the slide to the "Yes" side, but not enough to clearly turn the situation around?

•Even if federalist leaders want to make major restructuring to please Quebec, would they be prevented from doing so by the rest of the Canadian electorate?

•What are the chances of the sovereigntist side making sufficiently significant mistakes to break their own momentum?

•What are the chances of the Canadian economy deteriorating to a point where everyone is afraid to make a political move, delaying matters indefinitely?

•What are the chances of the sovereigntist side deliberately deferring any test of strength until they see a clear win, and then finding that the years go by with little movement on either side?

•What are the chances that the next federal election will continue to see Quebec largely represented by sovereigntist MPs?

After considering questions such as these and any others you might think relevant, you should be ready to put a probability in each of the boxes for the first three scenarios. Unless you differ radically from most people we have canvassed, you will assign a significant probability to each of them, meaning that we should continue our examination of each branch.

We now move to explore the "downstream" possibilities.

After a "Yes," negotiations or "stonewall"?

First: negotiations

There is a school of thought that says any level of "Yes" means that negotiations are necessary. There is another that says that unless the "Yes" has been very strong, perhaps 55 or even 60 percent, that this is not enough to negotiate the end of Canada. Remember: our purpose here is not to argue which of these propositions is correct, or which we would like to see. Our purpose is to forecast what might actually happen.

It can be taken for granted that the government of Quebec (and most of its people, no matter how they voted) will want to negotiate after a "Yes." In the first place, that is what the sovereigntists say they want to do, and in the second place, there will be important and urgent matters of mutual interest to resolve.

It is not clear that the governments in the rest of Canada, or the people they represent will want to negotiate. From this side too, however, there will be important and urgent matters of mutual interest to be resolved. But unquestionably, there will also be problems.

For example, there is no such thing as "the Rest of Canada." There is no government of ROC, and no rules for making decisions. Who would speak for ROC?

•Would the government of Canada (the existing Liberal administration) or the Parliament of Canada (which includes the Bloc Quebecois) be qualified to act for ROC? What about Parliament without the BQ, still controlled by the Liberals? What about Parliament without any Quebecers, including Liberals? Who would speak for those Quebecers who had voted "No"? And what about the current prime minister, a Quebec MP?

•If the existing government/ Parliament is not qualified to act for ROC, should there be an election? Would candidates run in Quebec? What are the chances that the government would call an election in those circumstances? (The circumstances would be great turmoil. The chances of a loss by the incumbent government might be quite high, depending on how the electorate assigned blame.)

•How should the provinces be involved? Should any negotiating committee include the premiers? Indeed, should it be only the premiers?

•What are the chances that financial markets in these circumstances would force rapid action of some kind to restore certainty? This is an extremely important point of debate.

There is one school of thought that suggests that the huge daily borrowing requirements of Canada virtually forces immediate negotiation and early settlement, because foreign lenders would cut us off in these circumstances until they knew for certain that Canada would survive and pay its bills. This school foresees interest rates of 30 percent and a Canadian dollar at 50 cents until the situation is satisfactorily clarified for lenders. This would cause everyone such pain that a deal would be made rapidly.

There is another school of thought that says that Canada is a solid country and that lenders would take a more relaxed attitude. This, along with the efforts of the Bank of Canada and other central banks would tide us over. In addition, of course, the Bank of Canada can print unlimited quantities of Canadian dollars to meet emergency bills, even though this is highly inflationary.

Others say that United States bondholders would force their government to apply extreme pressure to all parties to get the issues resolved. Still others suggest the Americans would like nothing better than the chance to come in during the chaos and buy first class Canadian assets at 50 cents on the dollar.

Naturally, the greater the pressure from financial markets, the greater the chance of an early deal, and of mistakes due to hurry.

The other possibility: stonewall

Some people say that the logical move is simply to ignore a "Yes" vote (if it is not too high). They say that a Quebec badly divided down the middle at, say, 55/45 could not muster the concerted action to actually do anything about the vote. Just ignore it, they say, and the inevitable problems of deficits, leery lenders, and declining investment will end this adventure. What are the chances they would prevail? But others say that once there is a "Yes" the game is over—if not now, in due course. And why would one want to keep people under the same roof if they really want to leave? Would they prevail?

Here are some other questions:

•What would a stonewall do to the credit-rating and investment activity in the rest of Canada?

•What would Canadians be doing with their Canadian dollars during a stonewall?

•What would Quebecers be doing with their Canadian dollars at this time?

•How long might a stonewall last before a sovereigntist Quebec government took one of its two choices at that stage: to fold and give up, or declare a UDI?

•What pressures might each side bring to bear during a stonewall? How could Canada pressure Quebec—by sending less money? How could Quebec pressure Canada? By, say, advising Quebecers to stop paying taxes to Ottawa, while still demanding services?

The collection of taxes under our system rests upon a system of voluntary compliance. Even today, under the established order of Canada, there are not enough revenue agents, police, and prisons to deal with any widespread and deliberate politically-based tax refusal.

The situation in Quebec after a "Yes" would be far more difficult. Law in that province is effectively enforced by the provincial and municipal police. The court system is provincial (even though many of the judges are federally appointed). The province even collects the GST for Ottawa! Some of the most effective collection and enforcement techniques, such as the registering of liens, rely upon provincial registries. The federal tax system in Quebec would simply break down without either voluntary taxpayer compliance or provincial government cooperation. And of course, many taxpayers would gladly seize an opportunity not to make a tax payment or two.

For its part, the provincial government has an independent income tax system, which would continue unaffected.

•Would the interests of ROC be identical on the matter of a stonewall, or might the stonewall scenario be more attractive to Ottawa (which might fare worse in a breakup than anyone else) than to either the provinces or the electorate? In the latter case, is there anything the provinces or electorate might or could do about it? Might there be differences among the various provinces?

A bit further down the negotiation/stonewall road

Negotiations first, once again.

Once the opening of negotiations has been agreed to by both sides (or by all of the multiple sides if the provinces speak for themselves) we can assume there is a good faith wish to achieve a deal, at least for public consumption. But we cannot assume that a deal will be reached, as there are many difficult questions.

•Will the matter of Quebec's borders be raised? This is of the greatest importance. This issue could be the immediate deal-breaker.

The theoretical basis usually given for a review of Quebec's boundaries relates to the transfer of certain northern territories to Quebec at the turn of the century.

The political motivation relates to anticipated demands from aboriginals and areas of high "No" votes for a right to have their territory remain in ROC, assuming ROC continues.

There is also a worry about free transit to the Atlantic provinces and ocean. (This would be easily agreed upon.)

If ROC negotiators are determined to change Quebec's boundaries, it will almost certainly be a show-stopper. No Quebec government could survive such an agreement; all political parties in Quebec are strongly unanimous on this point, and so is the overwhelming majority of francophone Quebecers, who comprise about 80 percent of the population.

Therefore, if you believe that the matter of boundary change will be a bottom-line requirement of ROC as well, you should assign a high probability to "no deal."

•Is a meeting of minds possible on the federal debt? The usual Quebec position is to pay about 17 percent of the interest only, without assuming the debt. The usual ROC position is that Quebec should assume and pay 25 percent of the debt (its population share).

Quebec has detailed calculations that show the logic of its 17 percent number. The papers of the Belanger-Campeau Commission are the main reference. Other analysts have calculated that Quebec should in fact pay up to 32 percent, based on historic federal expenditures in the province. As a practical matter, Quebec now contributes about 20 percent of federal taxes, and if it accepts any debt number less than that, it would increase the present burden on ROC. Should Quebec accept any number less than the population share (25 percent), it would be politically contentious.

•Would continuing Canadian citizenship and passport rights be available for citizens of a separate Quebec? Almost certainly not, because of the financial implications inherent in 7 million people having an ongoing and open-ended right to pensions, health, and social programs if the Quebec economy worsened. But there would probably be some interval—two years has been mentioned—for Quebecers and ROCers to choose their preferred citizenship, which might have residency requirements.

These are some of the main questions. There are a host of details that need to be sorted out—asset division, pensions to public servants, trade agreements, and so on—but these can all be resolved with minimum pain. On the other hand, all of these very important subsidiary issues—accession to NAFTA, the WTO, trading rights with ROC, cooperation in the use of the Canadian dollar—also have an emotional content which would be heightened as negotiators used the issues as bargaining chips.

•What are the chances of bad blood torpedoing the negotiations?

And the "stonewall" track?

The considerations if a deal were attempted and failed are much as above. However, the consequences for both Quebec and ROC could be very different. Quebec's position, after a failed or "no deal" negotiation, would effectively revert to the "stonewall" scenario. Quebec's choices would then be to fold, or declare a UDI. For ROC, the world after failed negotiations would be different from the world after an agreement, even though Quebec might be gone in either case. Successful negotiations would be a positive achievement for ROC, and would enhance its chances of staying together. Failed negotiations would leave a sour taste, and enhance the likelihood of other provinces going their own way.

In any event, on this track we have now reached the stone wall: no deal is possible. Now what?

At first blush, it might be thought extremely unlikely that a sovereigntist government with a mandate for independence would simply look the future in the eye, however troubling, and then walk away, tail between its legs. And indeed, you may assess it to be unlikely, but there are a couple of considerations.

•If the financial markets react extremely negatively to events, and if the feds hang tough, and if not just the government of Quebec, but Quebecers as individuals, are unable to borrow money for operations, housing, capital investment, or debt servicing, severe pressures could be brought upon Quebec City.

•If the cries and protests of aboriginals and "No" voters generate great sympathy in ROC and international circles, especially Quebec's markets in the United States, very serious trade pressure could be brought to bear for these non-economic reasons. How much of this could the Quebec government take?

•If "No" voters within Quebec mounted a determined campaign of passive resistance and civil disobedience, how much of this could a society take? This is especially the case if there were a serious outmigration of the mobile "No" voters, the wealthy, the skilled, and the young people that no community can afford to lose. How likely are such responses, in reaction to a democratic and fair vote?

On the other hand, Quebec's government has strategies to attempt to counter these difficulties. For example, financial markets are notoriously unsentimental. If, by the time of a UDI, the government of Quebec has satisfied creditors of its fiscal rectitude, the financial reaction might be quite mild. This would mean, among other things, adopting very severe budgetary measures, and unilaterally undertaking to service a reasonable fraction of the federal debt. This would be painful for Quebecers personally, but would be characterized as a part of the price of freedom.

Quebec is in a far stronger position than Ottawa to offer an acceptable deal to aboriginals, in terms of self-government and access to resources. Ottawa has no resources to give (except cash, which is important) and is seriously constrained on the self-government issue by the precedent that would be created for natives in the rest of Canada.

As for "No" voters, Quebec would undoubtedly be extremely solicitous, in terms of constitutional guarantees for the English language, Charter rights, and so on. So these forces might be contained. But there are other UDI issues.

•The matter of international recognition and admission to the various trade and financial organizations is important. If ROC remained united and angry at Quebec, it would almost certainly cause as many international problems as possible.

•On the other hand, a UDI would be a terrible shock to ROC, enhancing the prospect that it might not remain united. This, too, would have serious adverse consequences for Quebec. It would have no one to negotiate with on the simplest of matters.

In addition, the financial situation would likely be unstable and painful if ROC were in the process of splitting up, given the potential of defaults on the federal debt (mentioned in a later section). In this context, it is important to note that it is not just foreigners who would be inconvenienced. The stability of Canadian financial institutions, including those in Quebec, is intimately associated with the integrity of the federal debt. This includes pension funds.

However, Quebec might have a certain amount of international support in these circumstances, especially from francophone countries. This support might extend to financial assistance.

And what about ROC after this?

Whether there is a deal, or no deal followed by a UDI, as long as Quebec exits (which occurs in every part of Scenario 1 except the option "Quebec folds and gives up") then ROC is faced with a decision about its own future. Does it hang together, or does it split up? Many Canadians have never thought about this question at all. There has been no need to, until now. Indeed, the prevailing assumption in the rest of Canada is that it would be regrettable if Quebec were to go, but life would go on.

Many go further. Not only would life go on, but we would be a bit wealthier on the average without the largest of the poorer provinces, and the remaining provinces would be much less quarrelsome. We could get on with our English Canadian lives. People who say "Let them go" have something like this in mind. However it is most unlikely to be so easy. For a full analysis of the problem, have a look at Plan B: The Future of the Rest of Canada, Vancouver: The Fraser Institute, 1994. A brief summary will serve here.

With Quebec gone, ROC would have to be reconstituted. If Quebec left legally, it would be by way of a constitutional amendment and the revisions to ROC might be made at that time. If Quebec left by way of a UDI, ROC would still need to be reconstituted, since most of our federal structure, by law and by convention, assumes the presence of Quebec directly or indirectly.

More important than law and history would be political reality. Canada is the product of over a hundred years of difficult compromise. At a philosophical level, the compromise has been between east and west, the centre and the regions, the rich and the poor, the left and the right, the new Canadians and the traditional occupants. At a political level, Canada has been a compromise between the feds and the provinces, the centralists and decentralists, and the large provinces and the small.

At a policy level, Canada has worked out laborious "national" policies on culture, trade, aboriginals, language, immigration, and inter-regional income transfers. Quebec has been at the centre of every single important compromise. All of these compromises would have to be successfully reworked for ROC to carry on. What are the chances of this happening? Here are some questions.

•Would B.C. and Alberta agree to a continuation of anything like the existing federal structure with Ontario containing 50 percent of the population and votes? (Indeed, would B.C. and Alberta join the Canada of today, even with Quebec, if they were outside of it and had a choice?)

•If B.C. or Alberta did not like the proposed new arrangements, would they, too, be able to leave? How would this happen? What would it do to ROC?

•Without Quebec as an ally, would the poorer provinces be able to negotiate comparable levels of income transfer in the new ROC?

•Without Quebec as an ally, would B.C. and Alberta be able to resist the traditional centralizing tendencies of Ottawa?

•Reconsidering the list of potential decentralist measures discussed under Scenario 2, "A winning federalist initiative," would the rich provinces be more or less in favour of devolution?

•If Quebec left by declaring a UDI and assumed no responsibility for the federal debt, what strains would this put on ROC?

•If ROC did break up, would there be winners and losers, or would everyone be losers?

•What are the essential interests that would try to bind ROC together?

•What are the forces that would tend to split ROC apart?

•If ROC did hang together, would it be the quite centralized Canada-without-Quebec visualized by some, or would it be the very deeply decentralized confederation visualized by others? Does the answer to this question depend on where (in which province, or in a rural or urban area, for example) the respondent lives?

•If ROC fell apart, would the rich provinces take their share of the federal debt? Could the poor provinces afford to do so?

•Does making a deal with Quebec (as distinct from a UDI) make it more or less likely that ROC would remain together?

•If Quebec left, raising the question of the continuity of Canada, why would it be in the interests of each province, province by province, to stay with ROC?

•Would the United States be interested in any provinces? Would any provinces be interested in the United States?

•In all of this turmoil, what would be the legitimacy of the federal government? What would it be trying to do? Would it have a mandate?

•What about the legitimacy of the provincial governments to deal with these all-important questions?

•Would there be a time or a place for a citizen-based attempt at restructuring, i.e., an elected constituent assembly?

If you think through the above questions in a detailed way, it might assist you to assess the probabilities of ROC continuing, and if so, in what configuration.

Scenario 2: the winning federalist initiative

We have fully looked at this scenario already. There are no branch points, in terms of Canadian unity. Either there is a winning scenario which fully preserves the territorial integrity of Canada, or there is not.

By this point, therefore, you should have already filled in the probability of this second of the three main streams, in the box in the first column of the spreadsheet.

We now continue to the third main scenario, which does have ongoing branch points, though not as many as the first ("Yes") scenario.

Scenario 3: neither side a winner, no resolution, more of the same

Under this scenario, the uncertainty goes on, and on, and on, until something else happens. As noted above, we can deal with it analytically by recycling the probabilities through the initial scenarios. But dealing with it in human terms might be quite a different matter.

•Is there a growing sense that this issue has somehow to be put behind us? If this is so, how much time do we have, and how prepared are people to accept even rather unpalatable solutions in order to bring closure?

•Does this sentiment vary in different parts of the country? If so, does this matter, and how?

If people do turn out to finally have had enough, through loss of patience or weariness, there are two definitive ends to the "neither side a winner" branch.

The Irish result

Under this scenario, sentiment in the country outside of Quebec finally turns to the view that the only way to bring closure to the everlasting visit to the dentist is to actively cooperate in the departure of Quebec, as did Britain with Ireland in 1921. One important consequence is that this stance greatly increases the bargaining position of Quebec. If both sides actively want an outcome, mutual concessions are much more likely. Thus, it is in the interests of sovereigntists to make the argument that the departure of Quebec would be a good thing for ROC too, and indeed this has been an enduring theme.

Under this scenario, the same issues are up for negotiation as with Scenario 1 (the sovereigntist forces win the next referendum). The difference is in the attitude of ROC. The main questions here therefore are

•What relaxation of stance on the difficult questions of boundaries, citizenship and debt is the ROC side willing to contemplate in order to advance the solution?

•How will ROC have designed and agreed upon its own future (together or separately), since this clearly must be considered at the same time as a voluntary adoption of the Irish result.

In the case of Britain and Ireland, there was no problem of that sort, there never having been any question of the rest of the British Empire being affected by the matter. That is not the case in Canada. It would be quite impossible to make a deal with Quebec, in advance of the rest of us having made a deal among ourselves.

The essential questions in this regard are very tough. They were canvassed in the section on the survival or breakup of ROC.

And we come now to that question again, after the assumed "Irish result." These scenarios obviously are restatements of the previous ROC continuity discussion.

But there is a major difference. In the previous scenarios, the timing for deciding the future of ROC would be driven by Quebec. In this scenario, the timing could be much more deliberate and planned, since the deal with Quebec would not be initiated until ROC had completed thinking about its own future. The sorting out process would therefore have more time to be rational. But what is "rational" in these circumstances? Might it be different for B.C. than for Nova Scotia?

In this scenario as well, the negotiations with Quebec would likely be made much easier by the fact that ROC would have its own act together, rather than being required to concentrate on two tremendously important matters at once.

Erosion of will

In this branch of the "neveren-dum" scenario, the sovereignt-ists' will to win is gradually eroded. While history does seem to teach that nationalism movements may fade, to return with renewed vigour after many years, a fading in the globalized, technological, homogenized world of the twenty-first century might be more permanent. Permanent or not, it would allow the country to focus on other things. But how likely is such an erosion of will?

•Might a gradual set of partial concessions toward sovereigntist goals act to reduce the "Yes" forces at the margin to the point where the trend was clearly down? At that point, would the fall accelerate?

•Might demographic factors—the aging population, the low fertility rates of francophones, the influx of immigrants (minus the departure of migrants, perhaps)—gradually change the voting mix towards the "No"? (And might this very threat revitalize the "Yes"?)

•Might the cultural and technological steamroller of the English language finally do what Quebecers have always feared, in terms of impartially, objectively, uncaringly, but effectively so insinuating itself into Quebec society that a bilingual capability in an interactive, English dominated world ends up smothering the sovereignty movement with choices?

Any developments along this line would be against the evidence of October 30, unless, for some mix of reasons, that date measured the crest of a wave that has now passed.

There are some considerations in assigning probabilities. Before so doing, and as a check on where we are going, it might be of interest to take a quick overview of the worlds at the end of the decision tree branches.

The worlds at the ends of the branches

When all is said and done, we are looking at three alternate futures. They are:

•Canada carries on, perhaps much changed

•Quebec leaves and ROC carries on, perhaps much changed

•Quebec leaves and ROC splits up, certainly much changed

If Canada carries on

If Canada carries on, that will be either because it has been very considerably restructured to accommodate the sovereigntists (and westerners as well, to some extent), or because the sovereigntists have folded and lost. The probabilities you assign to the associated scenarios will suggest the balance of likelihood between restructuring and status quo. As a practical matter, however, we can have no doubt the status quo will change, and markedly so, if for no reason other than finance. (See Thirty Million Musketeers, Toronto: Key Porter Books and The Fraser Institute, 1995.) When the strains of the unity file are superimposed, the best guess, with a high degree of probability, is that even a continuing Canada will be a very different place.

If Quebec leaves and ROC carries on

The shape of ROC post-Quebec is a terribly important matter for people in ROC to think about. First, the subject is important in its own right. Would ROC survive or split into fragments? Second, one's view as to whether ROC (and its various parts) would be either somewhat better off, or much worse off, after the departure of Quebec will have an important influence on how much one is prepared to concede to avoid that breakup future.

The general assumption of a post-Quebec ROC has been that of a continuing Canada with a hole in the middle, a little richer, and probably a little more homogeneous, and therefore centralized. Some of the questions raised in this guide may have persuaded some that it is at least as likely, perhaps more so, that if ROC survives at all, it will have to be highly decentralized in order to do so, given the very different situations and aspirations of the provinces.

If Quebec leaves and ROC splits up

This is the meltdown world for some; but it is the promised land for others, especially for some citizens of the two western provinces, for whom a broken ROC holds no economic fears at all.

This very sentiment of many in the two western provinces—a certain willingness to pick up and go away, too, if Quebec does, is what vastly raises the probability that if ROC does survive, it will have to do so on the decentralist conditions of westerners.

But the split-ROC world is an economic horror-show for the Atlantic, and a major headache for the two poorer Prairie provinces, which would have to try to make a deal with either the West or the East.

The bottom line is that Canada will change, regardless of which scenario you choose.

The Canada clock

When all of the discussion is finished, and your decision tree is filled in, you are in a position to multiply out your probabilities, add them up, and see how you set the odds for Canada.

From a mechanical point of view, you need to go back to the work sheet, and write a probability number in each box. The number can be a decimal (0.4) or a fraction (1/3), whichever way you prefer to think. It can be a percentage too, but remember you will have to convert that to a decimal to multiply.

Next, calculate the probability number for each branch end (which is the vertical column of 10 boxes at the far right hand side of the worksheet. Like the earlier groupings of probabilities, this column of 10 boxes has to add up to 1.0, which it will if you have done your arithmetic correctly). The number you write in each branch end box is the probability of that particular outcome. For example, the very top box represents the probability that Quebec holds a referendum, and then the "Yes" side wins, and then there are negotiations, and then a deal is reached with Quebec, and then ROC survives after that.

The way to get the number for each box is to multiply every probability in that branch together. (Note that some branches have different numbers of entries. Scenario 2, for example, has only one entry, which goes into the summary box. In each case, the summary box is connected to the branch end by a dotted line.

To give a concrete example, the next page in this handbook is a worksheet that we have filled out with arbitrary probabilities. To keep it simple, we have assumed that each of the first three scenarios are equally likely, and then put some intuitive numbers in the rest of the boxes. If you look at the page, you can see how the arithmetic works.

Click here to view Figure: Worksheet with Examples

Now, the result is still not complete, because it shows an almost 17 percent chance of "more of the same." We can make that more definitive by a simple adjustment. To start, let us just add up the results we do know (please see the table below).

To get the "Canada survives" number, add up the probabilities in the three boxes marked with a black dot (•). To get the "Canada ends but ROC survives" number, add up the probabilities in the three boxes marked with a black diamond (�). To get the "ROC splits up" number, add up the probabilities in the three boxes marked with a black square (•). You will then have the numbers for column 1, the "interim probabilities." The interim probabilities add up to a number—in our example, 83.2 percent. To get the "adjusted probabilities" column, we then divide each "interim" number by their total—83.2 percent, or .832, in this example.

Click here to view Figure: Worksheet

The adjusted column removes the unresolved, "more of the same" cases, by using the pollsters' device of assuming that the "undecided" responses will end up, in a probability sense, more or less breaking the same way as the decided cases.

The final numbers will be surprising to many. That Canada itself only has a 51 percent chance of survival in our example (i.e. Quebec leaves) is something that we are slowly getting used to. But that there is one chance in five, from our calculations, that Canada will break into several mini-states (ROC splits up) is a new idea for most of us.

There is nothing wrong with the arithmetic. If you are uncomfortable with the results, the answer is to go back and change the numbers in the boxes. But the harsh fact is, if you think the first three scenarios have about an equal probability, then Canada is in big trouble however you slice it.

To dramatize this, we are proposing an image called the Canada Clock. It is similar to the "Doomsday Clock" of the Bulletin of Atomic Scientists, though of course the potential breakup of Canada is not remotely to be compared to the potential tragedy of a nuclear war. But it is a device that focuses the imagination.

The above diagram shows what the clock looks like, using the imaginary numbers developed earlier with our arbitrary assumptions.

Click here to view the Canada Clock

Now, on this three-handed clock, the shaded section is where Canada survives—much changed perhaps, but with the same boundaries. In the Atomic Scientists' language, is about 31 minutes to midnight.

The other sections graphically indicate the likelihood that ROC will survive, or not, if Canada breaks up. Pleaser remember that all of these numbers are illustrative only, based on the arbitrary probabilities that we assigned to our worksheet. Only you can develop your view of the odds on Canada.

Once you have done this work, you may want to go back and see what you, or our governments, can do to shift those odds if you don't like them. )

[You may also want to send a copy of your completed probability diagram to Gordon Gibson at The Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, B.C., V6J 3G7; we will compile the results and let you know other Forum readers' predictions in a forthcoming issue.]

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Last Modified: Wednesday, October 20, 1999.