Organizational differentiation and integration: the case of regional economic development policy in Canada

Peter Aucoin Herinan Bakcis

Organizational differentiation and integration: the case of regional economic development policy in Canada

Abstract: Over the past two and a half decades regional development policy and administration has gone through at least five distinct stages: in 1961 the government started with a number of uncoordinated boards and agencies; in 1969 it created the high profile and centralized Department of Regional ECO- nomic Expansion (DREE); a few years later (1973), DREE was decentralized and became more low key in its approach; in 1978 the government struck the centralized Board of Development Ministers, supported by the Ministry of State for Economic Development ( h i s m ) , to revamp the national economy while maintaining DREE in its decentralized format; and in 1982 DREE was abolished and the Cabinet Committee for Economic and Regional Development (CCERD), headed by a Llinister of State for Economic and Regional Develop- ment and supported by a liinistry of State for Economic and Regional Develop- ment ( XISERD) , was given the responsibility of integrating economic and regional development activities of all line departments. The logic of and reasons for the 1982 reorganization are assessed. Although innovative, particularly with regard to the placement of a Federal Economic Development Coordinator i FEDC) in each province, the reorganization does not necessarily mean improved regional polic?,. Xfajor obstacles are identified which may serve to prevent the objectives of the reorganization from being realized.

So~nmairc : ,4u cours des vingt-cinq dernikres annCes, In politique et l'administration du dkveloppenient rkgional sont passkes par au moins cinq Ctapes dis- tinctes : en 1961, Ie gouvernement a commence avec un certain nombre de commissions et dorganismes isolks; en 1969, il a cr& le ministke de l'Expansion konomique regionale ( M E E R ) , organisme centralis6 e t tr&s en vue; quelques :unntes plus tard, en 1973, 1e MEER a Ctir dkcentralisk et est devenu beaucoup

The authors are niembers of the School of Public Administration and Department of Political Science, Dalhousie University. An earlier version of this paper was presented at the Canadian Political Science Association Annual Meeting, Vancouver, B.c., June 1983. Financial support from Delhousie University's Research Development Committee, rising funds supplied by the Social Sciences and Humanities Research Council of Can- ada, is gratefully acknowledged. The authors are currently continuing their research on the subject for the Royal Comntission on the Economic Union and Development Prospects for Canada. This present paper is based on research conducted prior to their work for the commission.

CANADIAN PUBLIC ADMIIiISTRATION / ADMINISTRATION PUBLIQUE D U CANADA VOLUME 27, NO. 3 (FALL/AUTOMNE 1984). PP. 348-71.

REGIONAL ECONOMIC DEVELOPMENT POLICY

plus modeste; en 1978, le gouvernement a mis sur pied un autre organisme centralisk, la Commission des ministres du dkveloppement qui, appuyke par le dkpartement d’Btat au Dkveloppement kconomique ( DEDE) , devait rhorganiser I’kconomie nationale tout en maintenant la dkcentralisation du MEER; puis en 1982, le MEER a ktk aboli et c’est au comitk du Cabinet pour le DBveloppement kconomique et rkgional, dirigk par le ministre d‘Etat au Dkveloppement kconomique et rkgional et appuyk par le dkpartement d‘Etat au Dkveloppement Cco- nomique et rkgional, qu’a ktk donnke la responsabilitk d’inthgrer les activitks de dkveloppement kconomique et rkgional de tous les ministhres verticaux. L’article suivant kvahe les raisons de la rkorganisation de 1982. Bien que cette rkorganisation ait ktk innovatrice, particulii.rement en ce qui concerne le placement d’un coordonnateur fkdkral au dkveloppement kconomique dans chaque province, la politique rkgionale ne s’en est pas trouvCe nkcessairement amk- liorke. Les auteurs mettent en relief les obstacles majeurs qui emp&cheront peut-&re la rkalisation des objectifs de la rkorganisation.

On January 12, 1982 the Government of Canada announced a major reorganization of its various economic development policy portfolios and their supporting agencies1 The reorganization signalled the termination of a portfolio and department that, since 1968, had been the government’s flagship in the field of regional economic development policy, namely the Department of Regional Economic Expansion ( DREE ) . Given the economic exigencies of early 1982, this major reorganization was viewed in some quarters as tantamount to reshuffling the deck chairs on the Titanic. A fair amount of skepticism and criticism thus greeted the government’s announcement, especially with regard to the ostensible aim of making all the economic development portfolios ( e.g., Transport, Agriculture) responsible for regional economic development. The purpose of this article is to examine the reasons for and logic of this reorganization in the field of regional economic development policy. To this end, we describe the organizational and policy developments which led to this most recent reorganization: most recent, that is, because in this field of public policy and administration there has been an evolution of successive organizational regimes. Our thesis is that the reorganization constitutes a logical response to the perceived need for increased differentiation and integration in this policy field in light of the increasing priority given to the development of strong central agencies to support the collegial structure of the cabinet that has emerged over the past two decades.2 We do not argue, however, that the regional economic development policies of the federal govern- 1 Office of the Prime Minister, Release, “Reorganization for Economic Development,” January 12, 1982. It should be noted that the formal legislation for the reorganization (Bill C-152) was not passed by Parliament and enacted until the fall of 1983. 2 For a theoretical account of this general subject, see Paul R. Lawrence and Jay W. Lorsch, “Differentiation and Integration in Complex Organizations,” Administratioe Science Quarterly, 12, no. 1 (June 1967), pp. 1-47.

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ment will necessarily be improved as a consequence of this reorganization because there are clearly major obstacles which can easily undermine the intended consequences.

Our paper is divided into five sections. The first section describes briefly the initial efforts of the federal government to establish organizations and policy to deal with regional econoniic development in Canada up to and including the establishment of the portfolio and Department of Regional Economic Expansion in the late 1960s and its devclopnient in the 1970s. The secoiid section describes, again briefly, organizational changes in the 1970s as they relate to thc larger field of economic development policy, of which regional economic development policy was but one element. The third section focuses on the organizational integration of economic and regional dewlopment policies, culminating in the establishment of the Ilinistry of State for Economic a.nd Regional Development ( M S E R D ) . The fourth section examines the structures and processes of MSERD as a decentralized central agency with a focus on Federal Economic Development Coordinators (FEDCS) and their regional offices in the ten provinces. The final section pro\.ides an analysis and assessment of the reorganization in light of prior experience, especially with respect to the role played by DREE, and current political circumstances.

Regionalism, regional policy and DREE

\Vhile the concept of regionalisin encompasses several dimensions, three are particularly relevant in the Canadian contest. First, there is the political dimension of regionalism. \Ye have n federal system of government u4iich in large part reflects differing regional identities, cultures and parti- san preferences. hi turn, federal institutions tend to reinforce and enchance these identities by virtue of the considerable autonomy enjoyed by provincial governments which, it is argued, make ample use of the levers of power available to them to engage in province-building.3 The general consequence is what we can refer to as “intergovernmental governing: in virtually any jurisdiction both levels of government have some role, whether it be in education, fisheries or economic management.

The second is the spatial dimension of the national economy. I t encompasses two aspects: regional effects of national policy and regional dis- pr i t ies in resources and economic opportunities. The effects of inflation, interest rates and miemployment differ ~ i d e l y in different parts of the country while basic structural differences between regions and provinces in terms of resources, markets and per capita income have existed from before confederation clown to the present.“

3 dian Jorrrtial of Political Scicttce, 10, no. 4 (December 1977), pp. 695-725. -4

Alan C. Cairns, “The Governments and Societies of Canadian Federalism,” Calm-

There is an extensive literature 011 this topic. See especially the chapters by Paul

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The third dimension relevant to our study concerns the organization of the federal government. By the very nature of their activities many of the line departments have a large number of their employees based outside of Ottawa. Although there are obvious implications for span of control when administrative units are widely scattered, geographic dispersal is not the same as organizational de~entralization.~ It is possible and perhaps even desirable to decentralize the operations of a government department, using geography as a basis, with a view to making the organization more effective or at least regionally sensitive. This sort of decentralization, however, has not been extensively practised by the federal government, and the decentralization of DREE, to be discussed below, stands as an exception rather than the rule.

The three dimensions of regionalism outlined above have affected Cana- dian political and administrative life since confederation. However, with the possible exception of the Prairie Farm Rehabilitation Act of 1935, there was no such thing as a formal regional development policy by the federal government until 1957, the various ad hoc payments made to provinces over the years notwithstanding. The Diefenbaker government passed the Agricultural and Rural Development Act (ARDA) in 1961 and in 1962 created the Atlantic Development Board ( ADB), thereby ushering in a decade of regional policy that was characterized by unclear political direction and philosophy and dependent upon a number of uncoordinated boards and agencies for the deIivery of programs. Although ARDA was aimed at rural rather than regional development and was initially administered through the Department of Agriculture, the designated depressed rural areas were specifically located in the prairies and the Atlantic provinces. Furthermore, Alvin Hamilton, Minister of Agriculture at the time, conceived of rural development in distinctly regional terms, favouring growth in the regions themselves.6

When they came to power in 1963, the Liberals expanded these programs rather than abolishing them. To ARDA they added the Fund for Rural

Fox, “Regionalism and Confederation,” and Thomas Brewis, “Regional Development in Canada in Historical Perspective,” in N.H. Lithwick, ed., Regional Economic Policy: The Canadian Experience (Toronto: McGraw-Hill Ryerson, 1978). Recent evidence on regional disparities is provided in the Economic Council of Canada, Lioing Together, A Study of Regional Disparities (Ottawa: Supply and Services, 1977). 5 This distinction is not always clearly made. The best single work in this area remains James Fesler, Area and Administration ( Birmingham: University of Alabama Press, 1949). See also Sidney Tarrow, “Introduction” in Tarrow et al., Territorial Politics in Industrial Nations (New York: Praeger, 1978) pp. 1-27. On the geographic dispersal of Canadian federal departments, see J.E. Hodgetts, The Canadian Public Seroice (To- ronto: University of Toronto Press, 1973), pp. 219-38. 6 Anthony Careless, lnitiatioe and Response: The Adaptation of Canadian Federalism to Regional Economic Deuelopment ( Montreal: McGill-Queen’s University Press, 1977), pp. 71-78,109.


PETER AUCOIS AND HERMAN BAKVIS

Economic Development (FRED ) The Liberals were somewhat less com- mitted to Alvin Hamilton’s shibboleth that “no one should have to move because of rural poverty” and more prone to see rural development in terms of adjustment and mobility. Nevertheless, the Pearson government did create the Area Development Agency ( A D A ) to help bring jobs to people in depressed regions rather than vice versa; and in 1965 the ambit of the ADA was extended when it was superscded by the Area Development Incentil es Act ivliich deliberately favoured the poor regions. Generally it is important to note that during the 1961-69 period there were ambiguities in philosophy and tensions within and between the different programs and agencies concerned with regional development; above all there was a general lack of coordination.

,\lost programs were deli\rered by means of boards, agencies or, in certain instances, crown corporations, and lines of accountability often were not clear. 11ost of the boards and agencies did report to or operate within the confines of line departments: ADA became part of the newly created Department of Industry in 1963. ARDA was first administered through Agri- culture and then in 196-1 was moved to the new Department of Forestry and Rural Development. The placement of a program, moreover, was often determined on political groiindi The ADB was put by the Liberal government first in Sccretary of State and then in Transport, tlie initial placement and subsequent shift coinciding with the move of Jack Pickersgill, the senior minister from Newfoundland, from one to the other. It was only when Pickersgill left the cabinet in 1967 that the ADB found a logical home in Forestry and Rural In early 1963, the Special Planning Secretariat was established within the PCO with responsibilities for coordinating and directing all departmental policies for Canada’s “war on pok erty,” and this included regional poverty. The Secretariat, by virtue of being located within tlie PCO, had no funds or operational responsibilities. Its efforts at coordination of the different programs were described as “absolutely abortit e” and it was dissolved in 1967.9

In summary, during this period, in spite of the proliferation of regional programs. there WAS no single department whose sole or primary function was to prornotc and implement regional policy and there was a lack of CO- ordination between the different programs and agencies. The argument that certain line departments were at least regionally sensitive by virtue of having responsibilities for some of these agencies has to be discounted by the fact that the agencies in question were frequently regarded as poor cousins and their location in any given department was often anomalous. The commitment on the part of the federal government to doing something

7 Ibid., p. 7 2 8 %id, p. 114. 9 Cited in Careless, Ittitiatice and Response, p. 162


REGIONAL ECONOhlIC DEVELOPMENT POLICY

about regional disparities continued unabated. This commitment culmin- ated in the 1969 establishment of DREE and ushered in a new, albeit brief, phase of centralized control and program delivery. The new department took over existing programs such as ARDA-FRED and ADA, and had as its responsibility the design and implementation of regional development programs. It was a line department with its own funds to spend; but it was also expected to cooperate with and, when authorized by cabinet, to coordinate activities of other departments in order to achieve stated goals.1°

In the first few years of its existence DREE took a highly centralized approach to the problem of regional development. Regional officers of ARDA-

FRED lost their signing authority and were no longer permitted to deal with provincial planning agencies, agencies whose existence and growth in many instances had been encouraged by earlier ARDA-FRED policies and money. Federal-provincial consultative mechanisms at the regional level were abolished; consultation was now strictly between Ottawa and the provinces; and in many instances the provinces themselves were bypassed or ignored when federal policy initiatives were introduced into the regions.ll Within a few years DREE was forced to backtrack when a number of the provinces were successful in applying poIitical pressure on Ottawa. A number of the more rigid policies had to be adapted and readjusted after the fact in order to fit local conditions, illustrating the difficulties inherent in the centralized design and implementation structure.

In 1973, after an elaborate review, DREE’S operations were revised con- siderably with the introduction of a new policy orientation and a decentralized organizational structure.12 Regional policy became more multidimensional and projects were more widely distributed throughout the provinces, a change from the earlier stress on the “growth pole” concept which restricted development opportunities to large urban centres and projects to the provision of infrastructure and industrial incentives. Projects were now on a smaller scale but would encompass a wider range of sectors and be distributed throughout any given province.13 The multidimensional aspect recognized the fact that regional development encompassed a wide range of highly differentiated activities.

The reorganization itself comprised two aspects : decentralization of the department, and adoption of the so-called General Development Agree- ment ( GDA ) approach, Decentralization was achieved by establishing four

10 For a discussion of the legislation creating DREE, see Richard W. Phidd and G. Bruce Doern, The Politics and Mnnngernent of Cnnadian Economic Policy (Toronto: Macmillan, 1978), p. 326-28. 11 Careless, Initiatilie and Response, pp. 85-89. 12 Phidd and Doern, Canadian Economic Policy, pp. 328-29. 13 Donald J. Savoie, “The General Development Agreement Approach and the Bu- reaucratization of Provincial Governments in the Atlantic Provinces,” CANADIAN PUBLIC

ADMINISTRATION, 24 (Spring 1981), p. 119.


PETER AUCOIS AND HERMAN BAKVIS

regional offices, complete with administrative, financial and policy analysis support and headed by assistnnt deputy ministers. The ten provincial offices were also strengthened; and all development ideas, whether from Ottawa or the province, were henceforth channelled through the provincial offices. Both provincial directors-general and regional ADMS were given discrctionary authority to approve projects tip to fairly generous limits.'-' The GDA approach, in turn, reinforced the effect of the decentralization. The GDA was basically an enabling document which stated the general goals to be pursued over R ten-year period; subsidiary agreements then gave effect to these broadly defined goals by outlining the specific objectives and the means to attain them. llnlike earlier DREE initiatives, the GDAS were de- signed to be joint endeavours by Ottawa and the provinces. Once a GDA

had been approved by both the federal and provincial governments it was then administered by the Canada-Province Development Committee. Sub- sidiary agreements also required cabinet approval at both levels. These agreements \!'ere then implemented by joint management committees with equal representation from both governments, including the provincial director-general of DREE and a senior provincial bureaucrat. There were no politicians on either the development or management comrnittees.l:

The GDA era was unique in many respects, especially in light of the heightened level of competition and conflict between Ottawa and the provinces during the 1970s. The popularity of the CDAS with the provinces can be explained by the fact that in some provinces the federal government was willing to pay up to 90 per cent of project costs; and furthermore a number of low and medium priority items of the provinces could be brought under the GDA umbrella and hence receive funding. Once the GDA

and various subsidiary agreements were in place, DREE and provincial officials worked together with relatively little political interference. This bliss- fuI state of affairs, however, w;ts misleading; inherent in these arrangements were lodged major problems which in the long run helped to bring about the downfall of DREE.

First, there developed dissatisfaction on the part of political leadership at both levels of governmcnt with DREE programs. At the provincial level, politicians in some provinces felt that they had very little influence over programs once they were in place. At the federal level some ministers did not like their inability to infliience DREE expenditures. These concerns were in good part animated by envy on the part of line departments, which saw DREE initiating projects in their o\vn areas of jurisdiction while they themselves had to operate with restricted budgets. Equally important perhaps

14 111 the case of directors general it was up to $500,000 for individual projects; for regional ADSIS i t was S1,500,000; Phidd and Doern, Canadian Ecotzonzic Policy, p. 327. 15 Donald 3 . Savoie, Federal-Procirtcial Collaboration: The CatlQda-NetL: Brunswick Gcnernl Deceloprneilt Agreci;iott ( llontreal: XIcCill-Queen's Univcrsity Press, 1981 ), p. 29.



were the more general concerns by the federal government over the perceived lack of political credit and visibility for all the roads, canneries and strawberry farms funded by DREE. This concern became particularly acute during the early 1980s with respect not only to DREE but also other programs such as medicare and post-secondary school financing.16

From an organizational perspective, a major federal concern was that DREE was not proving to be terribly effective in coordinating and integrating the activities of other line departments. Particularly in taking a multidimensional approach, it was expected that the activities of line departments deemed to be relevant to development in a particular province would be coordinated or “bent” by DREE. The department had a certain amount of financial clout but no overall coordinating authority to override line department decisions. It could only offer to purchase the necessary program com- ponents from the appropriate line department and in a number of crucial situations this technique proved to be inadequate. The line departments in turn felt relatively little need to pay much attention to regional concerns, and indeed one common sentiment was that DREE existed to take care of regional issues and, therefore, line departments did not need to concern themselves with these re~ponsibi1ities.l~

In many respects DREE fell between a number of stools. It had neither the financial wherewithal to finance large-scale multidimensional projects, nor the political or administrative authority to coordinate and integrate the multifarious activities of other departments so as to be able to achieve the same objectives. Furthermore, by having insulated itself from direct political authority, and in having attracted a certain amount of envy on the part of other departments, it left itself highly vulnerable. When most of the ten-year GDAS were about to expire, and in the atmosphere of federal-provincial conflict over the constitution and fiscal transfers, matters became ripe for change. These conditions, however, were perhaps necessary but not sufficient to explain the demise of DREE. We need to take account of other developments in Ottawa and to place the problems confronting DREE, particularly in its relations with other line departments, in the broader context of policy and expenditure management and overall strategies for economic development.

The structures and processes of national economic development policy

The establishment of DREE, its subsequent decentralization, as well as its efforts to have other line departments participate more effectively in re- 16 Sheilagh M. Dunn, The Year in Review 1981: Intergooernmental Relations in Canada ( Kingston: Institute of Intergovernmental Relations, 1982), chap. 3. 17 See former DREE minister Donald Jamieson’s comments, as cited in Halifax Mail- Star, November 1, 1982, p. 7. Also Report of the Standing Senate Committee on Na- tional Finance, Gooernment Policy and Regional Development ( Ottawa: Supply and Services, 1982), p. 75.


PET= AUCOIS AND HERMAN BAKVIS

gional development were but ekments in a larger system of economic development policy-making and administration. \Vithin this larger sytsem, there emerged through the 1.970s an increased concern for greater coordination of the wide range of departments and agencies whose programs, expenditures and regulations related to economic development.18 By the late 1970s the federal government did have several mechanisms in place to provide for coordination as wdl as cooperation and consultation. The cabinet committee system, a number of “horizontal” or coordinating portfolios, an enlarged complex of central agencies, and a program budgeting system had been put in place in order to promote greater collegial decision- making and thereby increased coordination in policy development and program manageinent.l9 Notwithstanding these organizational innovations, however, there remained a number of deficiencies in the organization of the federal government, particularly with respect to economic development policy.2o

First, no single portfolio, not even Finance, was considered able to exer- cise sufficient leverage to define, let alone to integrate, the field of economic development policy. Economic development was a function of several portfolios including Industry, Trade and Commerce, Regional Economic Ex- pansion, Science and Technology as well as the several resource-based departments and agencies. Secondly, the cabinet committee system was not structured in such a way as to focus or integrate decision-making at this level on the broad subject of economic development policy. Thirdly, an effective “interface” between the government and the private sector was not considered to be helped by this highly differentiated departmental structure. Fourthly, thc increased dispersal of federal line departments to the regions had occurred over the years with what some thought was in- sufficient attention to the need for policy coordination in the field. Lastly, the decision-making system throughout the federal government did not appear to provide for a sufficient integration of policy and expenditure decision-making. These last three perceptions of shortcomings of structure and process had implications for fields other than economic development policy but for a number of reasons they were perhaps most obvious and acute in this field.

In August of 1978, the Prime Minister decided to effect major budget cuts in federal spending while at the same time giving highest priority to 18 See Richard French, IIotc Ottawa Decides (Toronto: Canadian Institute for Eco- nomic Policy, 1980 ), and Pliidd and Doern, Canadiari Economic Policy. 19 See G. Brnce Doern and Peter Aucoin, eds., Public Policy in Canada (Toronto, liacmillan, 1979 ). 20 See G. Bruce Doern and Richard Phidd, “Economic hlanagenient in the Govern- rnent of Canada: Some Implications of the Board of Economic Development Ministers and the Lanibert Report,” a paper prepared for the Canadian Political Science Associa- tion, l lay 30, 1979, Saskatoon, Saskatchewan.

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new initiatives in the area of economic development. This new fund for economic development programs during a time of restraint meant, of course, that intense interdepartmental competition could be expected for these discretionary funds and there was concern that the existing machinery of government was incapable of providing the desired degree of coordination and integration. These concerns had been addressed in the Privy Coun- cil Office and at least three major options for change were considered:

1. a new “super” department, providing for the integration of Industry, Trade and Commerce, Regional Economic Expansion, and Science and Technology;

2. a strengthened interdepartmental committee based on the above noted interdepartmental review process; and

3. a “board of ministers.21

This third option was presented to the Prime Minister shortly after his August decision and, in November, along with a cabinet shuffle, a new Board of Economic Development Ministers was created. This board of ministers was composed of the Deputy Prime Minister, the Minister of Finance and the President of the Treasury Board, the latter two as ex officio; the ministers of Energy, Mines and Resources, Science and Technology, Labour, Regional Economic Expansion, Employment and Immigration, National Revenue and Small Business, Industry, Trade and Commerce; and the newly created portfolio of the Minister of State for Economic De- velopment as president of this new board. The president and board were provided a Ministry of State for Economic Development, a support staff to serve both this new portfolio and new cabinet committee.22

The roles of this new portfolio, cabinet committee and central agency secretariat constituted an organizational innovation in a number of respects. Most important, in general terms, was the fact that this new structure integrated at the ministerial level functions which under the existing cabinet committee system had been separated, namely policy and expenditure decision-making. The board was not only a new cabinet committee for economic development policy, it was also a sectoral cabinet committee with powers to allocate expenditure resources for the programs of the departments within its sector. In this latter respect, the board has assumed powers which heretofore were located with a horizontal cabinet committee separate from the other cabinet committees, namely the Treasury Board. Concomitantly, at the official level, the secretariat to serve the Board, the Ministry of State for Economic Development, performed central agency - or staff - functions previously performed by the Privy Council Office and the Treasury Board Secretariat for the sectoral cabinet committees and the Treasury Board respectively. To this end, all ministers on the

21 Ibid. 22 See French, How Ottawa Decides, pp. 123-29.


PETER AUCOIS AKD IIERXIAS BAKVIS

hoard, and not just the president, were briefed by the ministry on the policy and expenditure implications of proposals to lie considered by them. In the particular field of c,conomic de\-c~lopinent policy there now was not only a cabinet committc~c but, eqiially important, a minister and Ministry of State with general pon’ers of policy coordination and integration for this nenIv defined field of fccteral government policy. In practical political terms, n i o r c ~ o ~ x ~ , the Prime LIinister made it clear, by virtue of the selection of the indiiiduals to hcaci both the portfolio and its secretariat, that this iiev. organization \vould be eiidonwl with the necessary political and bureaucratic pon-er.2:3

-4lthough there were obvious political reasons in 1978 to question the federal government’s commitmc~nt to these innovations, doubts about the organizational rationality of this changc \Yere to a certain extent laid to wst when the Progressive Constm.ative government of Prime Minister Joe Clark reorganized the structures and processes of the federal decision- making system using this innovation as its model. Although the board lost its title a n d became the Cnbinet Committee on Economic Development, its mandate and powers remaincd essentially the same, especially in respect to the integration of poli nd expenditure clecisioii-inakin~.~~ By the time the Liberal party returned to polver, the concepts of sectoral cabinet committees headed by ministers of state with their own central agency secre- tariats and of an integratcd policy and expenditure management system ~vere clearly established as the organizational principles upon which the csecutive decision-making system was predicated.’;

The integration of economic and regional development policy-making and administration

The establishmcmt of the Cabinet Committee on Economic Development, the Ministrv of State for Economic Development and the policy and expenditure managemcnt system did not substantially transform the roles of the portfolios or departmcnts involved in the field of economic development policy. Rather, these innovations were imposed upon the existing structure. \Vithin this new system. however, the minister and the Department of Regional Economic Eqxinsion operated in a political and bureaucratic milieu which highlighted the strengths and weaknesses of the federal gov- c~rnment’s organization for regional economic development policy. The

“3 ILid., p. 126. 3.2 Ibid., pp. 13442. 25 See R. Van Loon, “Stop the Sfusic: The Current Policy and Expenditure Mnnage-

175-99, and his czcellent nnalysis of how the PEMS system works in practice, “The Policy and Expenditure llanagenient System in the Federal Government: the First Three Years,” ibid., 26 (Suninier 1983), pp. 255-85.

lllent S\’Sk?Ill ill Ottawa,’’ CAN.AI>IAS PUBLIC AD\lISISTRATIOT, 24 ( SUIl l lTleI 1981 ), pp,



mandate of DREE had been a sweeping one even if its powers had been limited. Its regional economic development responsibilities included industrial development, which brought it often into conflict with Industry, Trade and Commerce, but they also extended beyond: indeed, its responsibilities (if not authority) extended widely to encompass the specific concerns of a number of federal government departments, especially those in the major resource fields, which also brought it into conflict with them. DREE’S objec- tive was to alter the spatial distribution of economic development activities and, accordingly, to adjust or bend national programs to fit regional needs.

Although, as noted earlier, DREE’S capacity to coordinate, in an authorita- tive manner, the activities of other federal departments and agencies was extremely limited, politically and bureaucratically it did possess two assets which gave it some leverage. First, its decentralized structure in tandem with the GDA approach enabled it to develop effective relationships with provincial governments at the bureaucratic level. These relationships in the regions often afforded it the opportunity to initiate proposals and to see them well advanced before many of the affected political and bureaucratic officials in Ottawa, other than in its own department, were brought into the decision-making process. Secondly, the expenditure process as it related to the subsidiary agreements, given their federal-provincial character, was structured in such a way that DREE could draw on a separate fund. This fund, in some respects, constituted an expenditure envelope assigned ex- clusively to regional economic development programs.

Each of these assets, however, was also a liability for both Regional Eco- nomic Expansion and the federal governments efforts in regional economic development. Opposition from other ministers and departments to the regional economic development fund was inevitable once expenditure restraint set in, simply because restraint severely limited the amount of new or discretionary monies that could be allocated to programs proposed by other ministers and departments. The ability of DREE to support its new programs or projects provoked the obvious envy and even resentment of others. At the same time, these other ministers and departments did not welcome the efforts of DREE to bend their programs and expenditures to promote regionaI economic development. DREE could not dictate such programs or expenditure-bending, but it did have some leverage through the expenditure incentives of its development fund. While some success was achieved by virtue of this approach, its value was considered to be marginal at best and counterproductive at worst in at least two respects. First, Re- gional Economic Expansion’s mandate and activities were regarded by other ministers and departments as those of a distinct portfolio and department. Therefore, as noted earlier, little or no effort was made by others to consider the regional economic development dimensions of their programs or expenditures. Given that these programs and expenditures have major


PETER ACCOIF AND H E R M A S BAKVIS

effects on regional economic development, their importance clearly out- weighs the marginal effects which DREE could have on regional economic development, event with its GDAS and other programs. Moreover, with many of the infrastructure requirements for regional cconornic development accomplished through these agreements by thc end of the last decade, the perceived need to address the regional dimensions of these other programs and expenditures had become more critical. DREE had considerable responsibility in this regard, but precious little in the way of authority or power to fulfill them.

The second disadvantage of this structure and process was that DREE’S

mandate was limited to regional economic development which did not extend to economic development generally. In this sense, again, it was no more than one line department among many. At the same time, the establishment of the board and then the Cabinet Committee on Economic De- velopment with its minister and X4inistry of State for Economic Develop- ment was a recognition of the need for coordination in this field, a field that clearly embraced regional economic development. This new system provided the required focus but was simply imposed on top of the previous regime. This approach, as would be expected, quickly raised questions about the logic of maintaining thosc elements of the previous regime whose defects led to the establishment of the new arrangements.

The organizational response to thc perceived need to integrate more fully regional economic development policy and economic development policy involved extensive changes in three areas. First, the regional programs of DREE and the industry, small business and tourism programs of IT&C

were amalgamated through the establishment of a new Department of Re- gional Industrial Elpansion. (The trade branch of ITCC was transferred to a reorganized Department of External Affairs.) Both DREE and ITCC were thus dismantled as portfolios and departments. Secondly, the Cabinet Com- mittee on Economic Development and the Ministry of State for Economic Development were renamed to signify the intention of the government that “the regional perspective be brought to bear on the work’of all economic development departments and in all economic decision-making by the Cabinet”:2G hence the Cabinet Committee on Economic and Regional De- velopment and thc Slinistry of State for Economic and Regional Develop- ment. The regional focus of the government was to be enlarged to include all regions of the country, and no\v to be designated as corresponding to the boundaries of the provinces. To this end, all sectoral departments in this field were directed “to improve their regional capabilities and to build the regional dimension into their internal policy development and decision- making processes,” now that “responsibility for economic development in 26 Office of the Piime Slinister, Release, January 12, 1982, “Reorganization for Eco- nomic De\ elopment,” p. 1.



the regions , . , [would] not be the distinct mandate of a single department.”27 These departments were expected to take advantage of “the avail- ability of specialized personnel (individuals already in regions and now part of DREE)” to assist them in carrying out this directive of the Prime Minister.28 What this meant, of course, was that departments were to decentralize not only in respect to their operations, as many had done or begun to do, but, more important, in respect to their policy analysis and development functions.

The third major element in the reorganization, and an innovation of critical importance, was the establishment of a system of regional offices in each province as part of the Ministry of State for Economic and Regional Development organization. These offices, headed by a Federal Economic Development Coordinator of “senior rank,” have four main functions :

to provide an improved regional information base for decision-making by the Cabinet Committee on Economic and Regional Development ( CCERD) , for use particularly in the development of regionally sensitive economic development strategies;

to give regional officials of sector departments a better understanding of the decisions and objectives of the Cabinet;

to better coordinate the implementation of government decisions affecting economic development in the regions; and

to develop regional economic development policies for consideration by Cab- inet.29

This innovation is of critical importance because it is the decentralized organization of the ministry that, in large part, is meant to ensure that the advantages which obtained with the decentralized DREE are maintained, while the disadvantages which obtained with the limited capacity of DREE

to coordinate other line departments are overcome. This decentralization of a central agency is novel in the Canadian experience and its success, or lack thereof, will depend upon a number of factors, a subject to which we now turn.

The roles of Federal Economic Devel- opment Coordinators and regional offices

Crucial to the roles of Federal Economic Development Coordinators (FEDCS) and their regional offices, and their capacity to perform their functions effectively, are the roles of MSERD in the policy and expenditure

27 28 Ibid., p. 4. 29 Ibid.

Ibid., “Background Paper,” p. 3.


PETER AUCOIS A S D HERMAN BAKVIS

management system ( PExIs) .30 MSERD’S roles in this system should enable it to have a major influence 011 both the determination of the strategies and priorities of the economic and regional development policy sector, as established by its cabinet committee, and the specific policy and expenditures decisions of this committee, It should have this influence in the former set of decisions by virtue of its coordinating role in the preparation of departmental “strategic overview” and “operational plans” and its own preparation of the entire sector’s “policy outlook“; its influence in the latter set of decisions would emanate from its provision to all members of the committee of “assessment notes” - that is, brief and concise analyses of departmental proposals which assess each proposal within the context of the government’s policies, priorities and resources. In short, MSERD functions as a support staff for this cabinet committee as a collective decision-making body and exercises a policy coordinating role vis- 8-vis the departments in this sector on behalf of its minister with respect to his role as Minister of State for the entire sector and as chairman of the cabinet committee.31

\Vithin this context, the roles of the FEDCS and their regional offices are clearly those of a central agency. Although these roles represent the decentralization of a central agency, the four functions to be performed by it, as noted in the previous section, do not differ in kind from the central agency functions performed by the central office. However, the decentralization of MSERD does enable 1ismD to undertake central agency functions in the field, functions which could not be carried out in the absence of decentralization. Given the cabinet committee’s and MSERD’S responsibilities for regional economic development, decentralization constitutes an essential element in this structure and process. Regional perspectives must be O b -

tained by xfsEnD through other than decentralized line departments, and regional economic development policies must be developed, in part at least, by staff in the regions.

The functions performed by the FEDCS and their regional offices involve three principal tasks. First, these officials must be able to develop a solid grasp of the particular characteristics, needs and opportunities extant in their provinces as they relate to government policies, priorities and resources. This understanding is essential if they are to contribute a regional perspective to MSERD’S policy outlooks and assessment notes. Although easier said than done, such an understanding is crucial to the effective per formance of their central agency roles. Secondly, these officials, and espe-

30 The analysis in this section is bawd primarily on confidential interviews carried out in January through April 1983. 31 Sec R.W. Crowley, “A New Power Focus in Ottawa: the Ministry of State for Economic and Regional Development,” Optimrcrn, 13, 110. 2 (1982), pp. 5-14; also Crowley, “The Design of Government Policy Agencies: Do We Leam from Experi- ence?” Canadian .lotrrnal of Regional Science, 5, no. 1 ( 1982), pp. 103-22.

362 CANADIAN PUBLIC ADMI~ISTELATION


cially the FEDCS, must be able to coordinate the implementation of federal decisions within the region without intervening in the actual management of programs. Again, the role of central agency officials is to effect coordination but not to engage in second-guessing the decisions of program man- agers. Thirdly, MSERD officials in the field must be able to facilitate effective federal-provincial cooperation and public sector-private sector consulta- tions without infringing on either the regular bureaucratic processes of such relations or usurping the regular processes of department-client relations.

The success of the FEDCS and their regional offices will depend on at least three sets of relationships : within MSERD, that is between headquarters and the field; between the FEDCS and their officials and the regional officials of the line departments; and between the FEDCS and their offices and provincial governments and the private sector. We shall deal briefly with each of these in turn.

The relationships within MSERD require that the FEDCS be fully involved in the work of MSERD. As central agency officials with responsibilities that encompass the full spectrum of MSERD’S responsibilities, albeit for a particular region, the FEDCS need to be informed of the thinking that is taking place within their headquarters. This requirement constitutes a significant challenge, notwithstanding the sophisticated technologies of communication at the disposal of MSERD. The FEDC must not be allowed to become either “our man in Havana” or a federal “spokesman” for his or her province. Neither role will serve the purposes for which a decentralized MSERD

was established. Two features of the established structures and processes of MSERD are

meant to avoid these undesired outcomes. First, the position of the FEDCS

within the structure of MSERD is a senior one, The FEDCS are clearly more than regional directors. They do not report to assistant deputy ministers but are included within the central management structure of the ministry along with the deputy secretaries for policy, operations and projects. Sec- ondly, the FEDCS have the right and responsibility to provide an input to the preparation of the principal policy memoranda which are given to all ministers on CCERD. Since such memoranda constitute the lifeblood of MSERD as a central agency, the FEDCS are, at least in theory, strategically involved in the policy and expenditure management system.

The relationships of the FEDCS and their officials to the regional officials of line departments require that the former work closely with the latter both to draw upon their expertise in their various departmental areas and to promote a sensitivity to regional economic development concerns in the development and implementation of departmental programs. It could be argued that the regional offices of h i s E m must remain small, in terms of professional stsff, if each of these objectives is to be achieved; otherwise,


PETER AUCOIS ASD HERMAN BAKVIS

the temptation “to do in the office” what should be done in departments will be great and, in any event, efforts to promote the required sensitivity to regional concerns will become diffused with too many MSERD officials involved.

Again, the same two features noted in the case of the first set of relations may serve to counter any development toward too many central agency officials in the field, that is in the regional offices. First, the capacity of the regional office to provide the required coordination demands that the FEW

play a major role in all efforts at coordination because it is the FEDC who wields bureaucratic clout. The FEDC thus has an incentive, if he or she wishes to be effective, to be involved in such efforts and thus not to spend the time on internal regional office management which would be required by a large staff. Secondly, the role of the FEDC in hlSERD’S operation of the policy and expenditure management system is supposed to give him or her the le\.erage necessary to promote the desired sensitivity to regional economic development concerns on the part of regional officials in line departments. Since the FEDC provides input to m E m ’ s assessment notes, regional officials of line departments should have an incentive to ensure that they provide a regional perspective to departmental proposals with regional implications, given that the FEDC will be in a position to comment on them. It is in their department’s interests, in short, that they develop the capacity to provide the required regional perspective and that such perspectives not bc upstaged by advice that is rendered by the FEDC.

The third set of relationships that must be atablished is between the FEDC and the regional office and provincial governments on the one hand and the private sector on the other. In respect to both of these relations the role of the FEDC must be clearly established as one in which he or she is acting, and is seen to be acting, by the other parties in such relationships as a “field representative of a central agency.” This role is one of coordination and not of operational management. As such, it must be recognized that the FEW cannot speak either for the Cabinet Committee on Economic and Regional Development or for individual ministers and their line departments. He or she i5 not, in short, a “prefect” for the federal government. On the other hand, the FEDC must be able to assure both a provincial government and the private sector in the province that he or she is able to effect the required coordination of federal activities as they relate to their particular concerns.

In our view in order for a FED(: to accomplish the latter task, it will be necessary that both xfsEm and the individual FEDCS achieve the first two required sets of relationships - that is, those internal to MSERD and those internal to the federal government in the sector encompassed by the Cab- inet Committee on Economic and Regional Development. This sector of the federal government, in other words, must get its own act together if

364 CANADIAN PUBLIC ADMIXISTBATION


external relationships are to be effectively established. To the extent that there is inter-organizational competition or uncertainty within this sector, external relationships will suffer.

Analysis and assessment The government’s reorganization in the field of regional economic development policy was received in many quarters with considerable skepticism and criticism. The Senate Committee on National Finance virtually ac- cused the government of abandoning its responsibilities for assisting the least developed regions.32 The Atlantic Provinces Economic Council (APEC)

echoed these concerns and argued that DRIE constituted an inadequate re- placement for DREE.33 Robert Stanfield claimed that because the federal government was so preoccupied with national economic considerations lesser concerns like the well-being of the poorer regions had been set aside.34

In every instance those who are critical of the reorganization which took place in January 1982 point to the decrease in federal government alloca- tion to DREE over the past several years, particularly as a percentage of total federal government expenditures, and to the shift of expenditures away from Atlantic Canada toward the west. The point that we would make in this regard is that these expenditure patterns were well advanced prior to I%X3j These were the result of policy decisions and it is obvious that the presence of DREE did little to prevent these decisions from being made. More significant in our view, however, is the perception on the part of the skeptics that the reorganization involved essentially the substitution of DRIE for DREE. In one sense perhaps this perception is not unexpected; even the well-informed observer tends to identify with line departments which implement programs, deliver services and distribute government funds. To many, therefore, what DREE once did is now to be done by DRIE, albeit with a more diffused mandate because it is responsible for both regional and industrial expansion.36 Those in the less-developed regions who have long regarded regional economic development as being either in unfair competition with, or a lower priority to, national industrial develop-

32 Report of the Standing Senate Committee on National Finance, pp. 74-76. 33 Atlantic Provinces Economic Council, “Analysis of the Reorganization for Eco- nomic Development: Background and Policy Directions,” Halifax, October 1982. 34 As quoted in Halifax Mail Star, November 1, 1982, p. 7. 35 Initially back in 1969, DREE’S expenditures represented 2 per cent of the federal budget; by 1980-81 this percentage had been reduced to half. Furthermore, in 1970-71 the proportion of DREE’S budget allocated to the Atlantic region was 53 per cent; by 1980-81 this proportion had dropped to 36 per cent. Atlantic Provinces Economic Council, “Analysis of the Reorganization for Economic Development,” pp. 13-14. 36 See, for example, “Ottawa’s merger sets the (alarm) bells ringing,” Globe and Mail, February 21, 1983, p. B1.


PETER AUCOIS A S D HERXIAN BAKVIS

ment can perhaps be excused if they view the reorganization as one which has sacrificed regional economic development on the altar of national industrial development, whatever the title of the transformed department of industry.

This perception, however, may be misplaced in some respects. DHIE does assumc some of the former responsibilities of DREE but, without repeating what ive have described in previous sections, the reorganization involves much more than this. SIost important, it designates regional economic development as a central concern of the cabinet comrnittce for this policy sector ( CCERD) and the ministry of state ( XISERD) that serves it. Secondly, i t demands that all line departments in this sector, including DRIE, assume responsibility for the regional dimensions of national economic development policies and programs. In short, regional economic development is supposed to become an integral part of economic development policy with a structure and process to provide for this integration. Regional economic development is no longer the principal mandate of one line department; nor has DRIE replaced DREE in this respect, even if it is one of the more important of the line departments in this sector.

Every reorganization, even those that are not subject to criticism and skepticism, brings with it its own set of obstacles which must be overcome if its organizational advantages are to be realized. In the case of major reorganizations, these obstacles will be encountered at a number of levels both intra-organizationally and jnter-organizationally. The organizational system created in January 1982 must deal with at least four potential obstacles.

First, this new system must overcome the resistance of line ministers and their departmental officials to the intrusion of the regional dimension into their specific departmental mandates and operations. The integration of regional and national economic development policies through CCERD and m E R D will have been for naught if the differentiation of regional economic development policy among line departments does not take place.37 Resis- tance to this intrusion of the regional dimension on the part of ministers and their officials is of course inevitable. It will be overcome only if there is present both the coniniitment of the leaders of the government, especially the Prime Minister, and incentives and sanctions for those who design and deliver programs. IrlSERD, to be sure, has a certain clout not only in Ottawa but also in the regions; but while this clout is necessary for the new system to work, it is not sufficient. At neither the ministerial level within CCERD, nor at the bureaucratic level within this sector, can the minister or Ministry of State for Economic and Regional Development demand that the ministers and their departmental officials fall into line without the ex-

37 For a discussion of some of the difficulties DRIE has encountered in this respect, 5ee “Drie still awaits its place in cabinet sun,” Financial Post, September 18, 1982, p. 1.



plicit and continued support of the Prime Minister, the Cabinet Committee on Priorities and Planning, and officials in the Prime Minister's Office and the Privy Council Office. If political priority is not given to the regional dimensions of the national economic development policies of these departments, then regional concerns will lose out, as the DREE experience demon- strated.

If political priority is given to regional development within economic development policy, a second potential obstacle may well be an overload on the decision-making system that results in process constipation and paralysis by analysis. In order to avoid these organizational pathologies, and assuming that priority is given to regional development, MSERD must succeed in formulating a reasonably coherent regional economic development strategy. Such a strategy will be required if CCERD and MSERD are to cope not only with the volume of program proposals from the several line departments which potentially could be involved, but also with the implications of these proposals for the government's priorities in this integrated field, including their interregional and federal-provincial dimensions. This strategy, in other words, should consist of a basic framework of priorities and criteria with which MSERD can assess policy and expenditures proposals, and CCERD can make decisions, with some measure of policy cohe- rence. If MSERD does not succeed in this respect, its coordinating role will be to no avail: the system will break down under the weight of its own design.

The third potential obstacle involves the relationship between this new formal system for regional economic development policy and the longstanding informal system of regional ministers.38 How this new system relates to the informal powers which have traditionally been granted to regional ministers is not clear. What, for example, will be the outcome when a proposal for a particular province emanating from this new system runs counter to the political priorities of a regional minister for that province? Or, to take the opposite example, what happens when a regional minister attempts an end-run around the CCERD/MSERD apparatus because his or her pet project does not fit with the provincial economic development perspective adopted by CCERD for the region? These are not merely theoretical questions; indeed, there is some evidence to suggest that tensions between the new formal system and the longstanding informal system have already emerged, as of course might have been expected. With respect 38 This, of course, is a tension inherent in the political-administrative relationship generally. The divergence between political needs and the exigencies of economic policy is discussed in E. Tufte, The Political Control of the Economy (Princeton: Princeton University Press, 1978). On the dangers of designing a planning and coordinating system which excludes the political dimension, see H.R. van Gunsteren, The Quest for Control: A Critique of the rational-control-rule approach in public affairs ( London: Wiley, 1976).


PETER 4UCOIS A S D HERMAK BAKVIS

to the Atlantic region, these tensions are clearly significant given the number of so-called regional ministers with very specific local ties. If a significant number of regional program or espenditure decisions are made outside of the CCERD/MSERD process, the credibility of the FEDCS in the regions will be undermined and the integrity of the regional policy and expenditure management system will be jeopardized. \Ve are not saying that the political dimension should be overridden, far from it; the alternative of the FEW turning into a kind of French prefect would be equally destructive for other reasons. But it is necessary for the political and organizational dimensions of regional policy to be integrated into a common coordinating framework. Perhaps in the long run we may see the development of regional ministers of state who would then play an important role in the CCERD. At the moment, of course, not all regional ministers are members of the CCERD.

The final major obstacle lies ~n the area of intergovernmental relations. Allan Tupper argucs that the reorganization, in conjunction with Ottawa’s wish for enhanced control over economic devclopment, will result in a heightening of federal-provincial conflict.39 Again it is important to note here the distinction between the policies pursued b y government and the structures used to deliver them. The two are related, but it is misleading to say that one determines the other. With reference to federal-provincial con5ultation in general, the introdiiction of MSERD’S regional offices will probably ha \ e a differential efTect depending upon the province. Some provinces may feel that the FEDC acts as a buffer and thereby hinders direct communication between the province and Ottawa, particularly if the province has been accustonied to conimunicating with Ottawa on a minister-to- minister basis. On the other hand the Maritime provinces may have reasonably fond memories of both the ARDA-FRED and DREE-GDA periods when there was close liaison between local federal and provincial officials. NSERD’S regional offices clearly draw on this tradition and the FEDC has a clear mandate to establish relationships with provincial officials as well as with non-governmental groups in the region. At the same time there is nothing to prevent the provincial government from dealing directly with ministers or officials in Ottawa. In a sense communication might be enhanced by the province approaching both Ottawa and the FEDC.

With respect to future economic development agreements with the provinces, the federal government has taken a more aggressive stance, which suggests shades of the 1969-71 DREE period when policy initiatives were tendered to provinces on a take it or leave it basis. However, the present policy orientation (which is still far from being firmly set) and the organ-

39 Allan Tupper, Ptcbltc Aforq 111 the Pritate Sector: Industrial Assistance Policy and Canadian Fetleralism ( Kingston: Institute of Intergovernmental Relations, 1982), pp. 105-106.



izational structures differ in three crucial respects. First, the early DREE

approach was highly centralized; the provincial offices played little or no role in the negotiations between DREE and the provincial governments. In the present case, the FEDCS appear to be playing an important role, both directly and indirectly, in the negotiating of new Economic and Regional Development Agreements ( ERDAS) to replace the expiring GDAS. There is opportunity for the federal government both to be better aware of provincial needs and demands and to design agreements that fit the needs of particular provinces.

The second point relates to the aim of the federal government to achieve greater control over regional policy. In part the aim is improved integration of all economic development programs, both national and regional, something which was difficult to achieve under the GDA approach. As well, the desire for greater control reflects a further federal unhappiness with the GDA experience, namely the inadequate return on investment in terms of political credit and visibility. This may well have been the most important factor underpinning the abandonment of the GDA approach. But it is worth noting again that the additional problem was the perceived lack of political control on the part of some ministers and a decline in accountability. This problem was also of concern to some provincial politicians, though it was most likely construed as a problem of personal influence rather than accountability to their provincial legislatures. Perhaps the greater potential for federal-provincial conflict is one of the trade-offs that has to be made in having greater visibility and accountability.

The third point is that the federal goal of greater control over, and credit for, regional development policies neither precludes nor excludes negotiations with provinces as to which government will be responsible for what program component in any given economic development agreement. It does appear to be the wish of the federal government to coordinate its policies with those of provincial governments, and to do so under the rubric of ERDAS presently being negotiated with the provinces by the sectoral departments, under the coordination of MSERD. There probably will be more continuity from the GDA period and greater room for negotiation than many people allow for. To argue that this means the ushering in of a new and harmonious era of federal-provincial relations is clearly unrealistic. Yet other than massive concessions on the part of the federal government to- wards Newfoundland and Quebec, among other provinces, there is probably very little that any kind of reorganization or policy reorientation could achieve to reduce federal-provincial conflict in the present circumstances.

In summary, will the reorganization result in a better regional policy? In one sense this question is virtually impossible to answer, given the widely diverging views on what constitutes appropriate and effective regional policy. Economists such as Anthony Scott have pointed to the ex-


PETER AUCOIS A S D HERMAK BAKVIS

ample of the United States where the reduction in regional disparities over the past four decades has been much greater than in Canada, in spite of the absence of either a regional policy or a redistributive federal equalization prograni.-‘O Factor mobility of both labour and capital is viewed as responsible for this state of affairs. Other economists, such as John Graham, have argued that in Canada these factors do not operate in the same way or to the same extent, particularly with respect to labour mobility.41 What- ever the merits of these economic arguments, what can be said is that in Canada it is politically imperative to have a visible regional policy. Over the years, and w-ell before the introduction of regional policy programs, the federal government has acceded to a variety of monetary demands from not only Quebec but many of the other provinces as well. This practice has long been embedded in Canadian political tradition, and most recently a general commitment to reducing regional disparities has been entrenched into the constitution.’2 No political party competing for national office in Canada would seriously entertain the abolition of regional policy (or equalization and other transfer programs ) as party policy.

In monetary terms, the test of an effective regional policy might be the extent to which government resources can be channelled into regional projects and programs through the ERDAS. The potential funds lie not just in the newly established regional fund but also in the “A” base of line department budgets and in any policy reserve fund. I t has been estimated, for example, that doubling the amount of money that Supply and Serviccs spends in the Atlantic region would represent far more than DREE was ever capable of mobilizing in this region. In theory, at any rate, MSERD’S mandate is that these resources in the “A” base and the policy reserve fund can be mobilized or bent for economic development purposes should suitable opportunities arisc in a given region. It has also been stated that MSERD

will concentrate on a limited number of opportunities in each province but on a fairly large scale.43 Although we will not judge the appropriateness of these policies, we can say that there is potential for much more in the way of actual resources being devoted to regional programs. Whether this potential will be realized only time will tell. As noted earlier, much will depend upon its political priority assigned to regional development policy, especially by the Prime Minister, and the formulation of a coherent regional development strategy.

40 .-Z.D. Scott, “Policy for Declining Regions: A Theoretical Approach,” in Lithwick ed., Regional Economic Policy, pp. 4G-67. Thonias Courchene most clearly favours migration as a means to alleviate provincial econoniic inequalities. See his “Interprovin- cial Sligration and Economic Adjustment,” ibid., pp. 74-101. 41 John Graham, Fiscal Adjtrsiment and Economic Der;elopment (Toronto: University of Toronto Press, 1963). 42 The Constitution Act, 1982, Part 111, 36( 1). 43 See “Drie still awaits its place in cabinet sun.”



From the management side, and to comfort those who argue that the best regional policy is no regional policy, it can be said that under the policy and expenditure management system employed by MSERD there is greater opportunity to identify contradictory policies. That is to say, regional policies which are clearly detrimental to national economic policies now stand a better chance of being identified and corrected; and the con- verse - that is, the identification of possible perverse regional effects of national policies - would also be true. Whether decision-makers will act on this sort of information is another question, but it does appear that at present there is greater likelihood they will have this information before them, which was not always the case previously.

Postscript On June 30, 1984, Prime Minister John Turner announced “measures to strengthen the role of Ministers and to streamline the Cabinet decision- making system.” These measures included the elimination of the portfolio and central agency that was MSERD and, as well, the use of assessment notes. In effect, the new Prime Minister reversed the policy of Prime Minis- ter Trudeau which had given increased emphasis to the development of strong central agencies to support cabinet decision-making.

With the elimination of MSERD, responsibility for regional development policy was given to a new minister of state for regional development, a portfolio under the aegis of the Minister of Regional Industrial Expansion. An “office” for regional development policy, operating out of DRIE, will serve this new minister of state and the FEDCS, now called federal coordinators, will report to this minister. This apparatus will be responsible for the coorodination of the ERDA process, with CCERD continuing to be responsible for approving ERDAS and subagreements as they are negotiated by relevant departmental ministers.

At this time the precise roles of the new, and clearly junior, minister of state for regional development are not certain nor, in particular, is his relationship with the minister for DRIE. There are suggestions that the latter wishes to take over responsibility for regional development policy and the 1984 changes indicate that he may be successful in this. On the other hand, there is every indication that regional ministers will be given greater power within the new Prime Minister’s cabinet. How these two developments will mesh remains to be seen. The same can be said for the roles and positions of the federal coordinators in each province. In any event, it is now clear that the 1982 reorganization did not overcome all of the obstacles which we have outlined in this article. Prime Minister Turner, in effect, decided that the logic of this reorganization needed to be turned on its head.


Documents

Organizational differentiation and integration: the case of regional economic development policy in Canada