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Canada’s Constitutional Mistake: How the Rule of Law Gave Way to the Managerial State

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44 minute read

From the C2C Journal

Most Canadians surely believe their society is governed by the rule of law. We all have rights and freedoms, safeguarded by the courts, that protect us from the tyranny of the state. All of that is mirage, argues Bruce Pardy. In this provocative essay, Pardy describes how authority in Canada is now vested in a managerial elite. They supervise our speech, employment, bank accounts and media. Controlling vast sectors of the economy and society, they track, direct, incentivize, censor, punish, redistribute, subsidize, tax, license and inspect. Elected legislatures delegate them authority, and courts let them do as they like – including infringing on Charter rights – to achieve whatever social goals they deem in the public interest. The rule of law has melted away; rule by law now prevails. It is time, Pardy says, for Canadians to correct the naïve constitutional mistake that started us down this road.

We made a mistake.

Kings once ruled England with absolute power. Their word was the law. Centuries of struggle and reform gradually overcame their tyranny. We adopted this idea called the rule of law. We established checks, balances, limits, restraints and individual rights. For a while it worked. The law in Canada, as in other countries that inherited British common law, provided a system of justice as good as anything that civilization had ever produced.

But now the rule of law is fading. When it suits them, our institutions set aside their restraints. Using an idea to hold the powerful in check works only for as long as the powerful believe in the idea. And increasingly in the Canada of today, they do not.

Our mistake, over these centuries of reform, was that we did not go far enough. We did not take power away from institutions to rule over us. Instead, we just moved the powers around. Today, as in the days of kings, the law is based upon the authority of those who govern, not upon the consent of the governed.

The Law is not what it Pretends to Be

Law students come to law school to learn the law, which many of them think is a bunch of rules. Learn the rules, and you’re a lawyer. But that is not what the law is or how it works.

On their first day of law school at the Canadian university where I teach, I read my students a poem. It’s a short  verse by R.D. Laing, a Scottish psychiatrist and philosopher who died in 1989. Laing was writing about personal interactions and relationships, but he might as well have been writing about the law. The verse goes:

They are playing a game.

They are playing at not playing a game.

If I show them I see they are, I will break the rules, and they will punish me.

I must play their game, of not seeing I see the game.

The law is a game. It pretends to be something it is not.

The Law does not Rule – People in Institutions do

I could have picked any of a thousand illustrations, but this one is simple. And it is one you already know.

Our Constitution is the supreme law of Canada. It says so, right in the text. The Constitution includes the Canadian Charter of Rights and Freedoms. Section 2(b) of the Charter guarantees the right to free speech. It says: “2. Everyone has the following fundamental freedoms:…(b) freedom of…expression…”

What can we tell from these nine words? We instinctively understand, immediately, that they do not mean what they say. Because they can’t. The provision plainly states that we have a right to free speech, but in its sheer absoluteness it tells us that we do not, at least not one that we can count on. How do we know?

Imagine someone comes up to you on the sidewalk and says, “I have a knife in my pocket. Give me your wallet or I’ll stab you in the heart.” That’s an assault. Your assailant threatened you with imminent violence and, in so doing, committed a crime. And yet, all he did was speak. There has been no stabbing, yet. There has been no theft, yet. The guy might not even have a knife. He spoke words. And section 2(b) of the Charter guarantees free speech. How can it be an offence?

The answer, of course, is that section 2(b) does not mean that all speech is protected. You cannot threaten other people with violence. I don’t know anyone who would argue that section 2(b) does or that it should allow this. But section 2(b) includes no limits. Its words don’t say where the line is. The provision doesn’t tell us what “freedom of expression” means.

Rights are not absolute: Despite Canada’s Charter of Rights and Freedoms, the courts have pronounced on everything from what jokes comedians can tell to what pronouns can be used in court; regulators will determine what online content you may see and what medical opinions doctors may express. (Source of top right and bottom photos: Unsplash)

Everyone knows that free speech is not absolute and that some speech is not protected. Courts draw that line. We pretend that they do so in a manner that is bound by precedent, logic and the principles of statutory interpretation. But those considerations don’t compel the answer. In fact, skilled jurists can basically come to any answer that they can conjure up and support with judicial rhetoric. Rationales shift. Rights can mean something a little different every time.

It’s easy to agree that people should not have the right to threaten violence. But that’s not where the line on free speech is now drawn in Canada. Instead, an array of restrictions on speech has been created. You may not discriminate in your public statements. Comedians may not tell jokes intended to offend someone’s dignity on a protected ground. In some courts you must speak the pronouns that others require. Regulators prevent doctors from expressing medical opinions at odds with government policies. The Canadian Radio-television and Telecommunications Commission has the power to curate online content. The federal government has promised to censor “misinformation” and “online harm”, which means speech that it doesn’t like.

As courts become increasingly sympathetic to legal concepts such as “collective good” and so-called “group” rights, free speech in Canada becomes less an individual right to say what you think and more a privilege to express ideas consistent with what is deemed the public interest. Our constitutional guarantee of free expression doesn’t mean what it appears to say. If the Charter was honest, it would read: “2. Everyone has the fundamental freedoms that courts decide, from time to time, that they should have.” Which is essentially what section 1 of the Charter, the clause stating there are “reasonable limits” to the rights in the document, has come to mean anyway.

In England, the long and difficult process of transferring power from the king to legislatures was marked by the British Magna Carta of 1215 (shown at left) and continued through the Glorious Revolution of 1688, which gave Parliament legislative supremacy. Depicted at right, the Glorious Revolution’s Battle of the Boyne Between James II and William III, 1690, by Jan Van Huchtenberg.

Every reasonably well-informed person knows this. And yet people still harbour the conviction that the Charter means something objective and solid. If I had a dollar for every person during Covid-19 who said, “But they can’t do that, it’s in the Charter!”, I would be a wealthy man. All the Charter does – ALL that it does – is shift the final call on certain questions from legislatures to courts. But I don’t want to leave you with the wrong impression. Our problem is not that power resides in the courts.

The original problem was the king. In a long and difficult process starting in England, perhaps, with the Magna Carta in 1215, we took power from the king and gave it to legislatures.

Centuries later following the Glorious Revolution, the English Civil Rights Act of 1688 provided, in the now-quirky spelling of that era: “…the pretended Power of Suspending of Laws or the Execution of Laws by Regall Authority without Consent of Parlyament is illegal.” Parliament was elected, by some of the people at least. Legislatures had democratic legitimacy. Legislative supremacy became the foundation of British constitutional democracy.

But legislatures can be tyrants too. Legislative supremacy means that legislatures can pass any laws they like. They could do – and sometimes did – similar sorts of bad things that kings could do. They could criminalize your private relationships. They could take your property. They could give police the power to invade your privacy without a warrant. They could censor your speech. They could eviscerate rights found in the common law.

The newly independent Americans offered a solution: they created a Bill of Rights (comprising the first ten amendments to the United States Constitution, ratified in 1791) that took power from legislatures and gave it to courts.

Two hundred years after the Bill of Rights, the Canadian Charter did the same: took power from legislatures and gave it to courts. And here we are. Except the story is not quite done. There is one more step to go.

The Rule of Law: Restrained Government

What was the idea of the rule of law supposed to be? Legal theorists through the ages – a short list of whom would include Aristotle, Montesquieu, A.V. Dicey, Lon Fuller, Ronald Dworkin, Joseph Raz – would say that the rule of law is complicated. But it need not be. To see it clearly, compare it to its opposite: the rule of individual persons. When King Henry VIII in 1536 ordered that his second wife, Anne Boleyn, should lose her head, that was the despotic rule of a person.

The meaning of the rule of law is made clear by its opposite – rule by the individual; when King Henry VIII ordered the execution of his second wife Anne Boleyn in 1536, that was the despotic rule of a person. Depicted at left, Henry VIII’s first interview with Anne Boleyn by Daniel Maclise (painted in 1836); at right, Anne Boleyn’s Execution by Jan Luyken (painted in 1600s).

But it is people who make laws. People enforce laws. People apply laws to cases. It can’t be any other way. How to have the rule of law without the rule of persons?

One way is to divide and separate their powers (and, to a manageable degree, to put them in competition or opposition to one another) so that no one alone can rule. The most practical way devised to accomplish this has been to divide the functions of a state into three branches: the legislative, the executive and the judicial.

Under the separation-of-powers approach, legislatures legislate. They pass laws without knowing the future circumstances to which the rules will apply. And if someone or some organization ignores their laws, they have no power to do anything about it directly.

The executive branch – headed and personified by a president, prime minister, chancellor or constitutional monarch – implements and carries out those rules. The executive has no power to design the rules it implements. Instead, its powers are limited to implementing and, in part, enforcing the rules that the legislature enacts. In the United States, where the President and Congress are distinct, legislative and executive branches are expressly separated. But even in Westminster parliamentary systems, where the same politicians lead the legislature and the executive, most executive action requires statutory authority.

Courts adjudicate. They do not make the rules but apply them to disputes that come before them. They also help the executive enforce laws by adjudicating prosecutions, passing judgment and handing out punishments. These rules prevent courts from deciding cases on judges’ personal inclinations. Moreover, courts keep the executive within its powers.

When powers are separated, no one has their hands on the wheel. No one can dictate what will happen in any specific circumstance. Legislatures don’t know to what future disputes their rules will apply. Courts must apply those rules to cases as they arise. Government agencies are bound by rules they have not made. As Austrian economist and philosopher Friedrich Hayek put it in The Constitution of Liberty, “It is because the lawgiver does not know the particular cases to which his rules will apply, and it is because the judge who applies them has no choice in drawing the conclusions that follow from the existing body of rules and the particular facts of the case, that it can be said that laws and not men rule.”

Checks and balances: Among the best safeguards against tyranny is a clear separation of powers; in the U.S., Congress (top) legislates, the executive branch – headed by the President (middle) – implements the rules, and the courts – headed by the U.S. Supreme Court (bottom) – enforce laws and adjudicate disputes. (Source of middle photo: Lawrence Jackson)

The rule of law protects us from the rule of persons. That’s the theory. But it’s not how it works, at least not anymore, and not in Canada.

The Unholy Trinity of the Administrative State

In Canada, the separation of powers has become a mirage. In its place, the king has returned to haunt us, albeit in a different form. What was once the monarch has become the administrative state, the modern Leviathan. It consists of every part of government that is neither legislature nor court: cabinets, departments, ministries, agencies, public health officials, boards, commissions, tribunals, regulators, law enforcement, inspectors and more.

These public bodies control our lives in every conceivable way. They supervise our speech, employment, bank accounts and media. They indoctrinate our children. They locked us down and directed our personal medical decisions. They control the money supply, the interest rate and the terms of credit. They track, direct, incentivize, censor, punish, redistribute, subsidize, tax, license and inspect. Their control over our lives would make the kings of old blush.

Legislatures and courts made it this way. Together, they have returned power to the executive, now occupied not by the king but by a permanent managerial bureaucracy, or if you like, the “deep state”.

We believed that these institutions would act as checks and balances on each other. But from the beginning, all we have ever done is move power around. No doubt they still have their disputes and quarrels between them. But for the most part they are now all on the same page.

 

Instead of enacting rules, legislatures delegate authority to the administration to make the rules: regulations, policies, guidelines, orders and decisions of all kinds.

 

Courts, instead of keeping agencies within their powers, defer to their expertise.

 

More and more, courts allow public authorities to do as they think best in the “public interest”, as long as their vision of public interest reflects “progressive” sensibilities. Courts generally require these administrative agencies to apply the law not correctly but only “reasonably”. According to the Supreme Court, government agencies can infringe Charter rights “proportionately” to the statutory objectives they are attempting to achieve.

Instead of the rule of law, we now have what has become the Unholy Trinity of the Administrative State.  Delegation from the legislature and deference from the courts produces discretion for the administration to decide the public good.

 

The human rights commission and the tribunal – not the legislature – decide what constitutes discrimination. Environment officials, not the legislature, determine the criteria for permitting environmental impacts. Cabinet, not the legislature, decides when pipelines will be built. Public health officials, not the legislature, order businesses to close and people to wear masks. The innumerable bodies of the executive branch now make rules, enforce rules and adjudicate cases. Together, the legislature and the courts have returned power to the king. Except the actual king, living in his palace in England, is now just a figurehead. The administrative state occupies his throne.

 

Indeed, the case could be made that we effectively now have four branches of government rather than three: the legislature, the courts, the political executive and the administrative bureaucracy (the “deep state”), which consists of those government actors not directly controlled or controllable by prime ministers or premiers and their cabinets.

 

Instead of separated functions, we have concentrated power. Instead of checks and balances, the branches cooperate to empower the state’s management of society. Together, their authority is almost absolute. They can set aside individual autonomy in the name of public welfare and progressive causes.

A Managerial Theocracy

Almost 1,000 years ago, William the Conqueror vanquished Anglo-Saxon England, made himself king and created a feudal society. If you belonged to its elite, unless you were Church nobility or a member of the royal family, you were a land baron. Land was the foundation of the economy. Inheritance determined land rights and social standing. Lineage was a moral principle. Good and important people were born to good and important families. If your parents were serfs, you were a serf too, and deserved to be one. God determined who you were. For at least the next 700 years, lineage was destiny.

Fast forward through the Enlightenment to the Industrial Revolution in the 19th century. Men began making machines, and machines began doing work. Industry, not land, became the predominant source of wealth. Land was still important but became a commodity to be bought and sold like any other. Like the patricians of the fictional Downton Abbey, the landed aristocracies faded away. Productivity and merit in the markets of industrial capitalism came to matter more than lineage. A new elite emerged: capitalists, entrepreneurs and innovators, closely entwined with the at-first small but steadily growing bourgeois middle class.

But this elite rapidly gave way to another. In the book-length online essay The China Convergence, the pseudonymous N.S. Lyons explains what happened:

“Sometime around the second half of the 19th century a revolution in human affairs began to take place, occurring in parallel to and building on the industrial revolution. This was a revolution…which upended nearly every area of human activity and rapidly reorganized civilization…in order to manage the growing complexities of mass and scale: the mass bureaucratic state, the mass standing army, the mass corporation, mass media, mass public education, and so on. This was the managerial revolution.”

A managerial theocracy was born. A theocracy is a form of government in which God rules, but only indirectly, with ecclesiastic authorities interpreting God’s laws for his subjects. In effect, those authorities are in charge. No one else gets to speak to God, so no one else knows what he means. Our managerial theocracy is secular yet works in a similar way. Rather than worshiping an external deity, the concept of “management” itself plays the role of God. Technocrats and experts are its priests and bishops. They determine what management requires in any situation.

If you are a member of the elite today, you are probably not an entrepreneur. Instead, you belong to the professional managerial class. You help to plan, direct and engineer society. You make policy, develop programs, spend public money, make legal decisions or issue licences and approvals. You are a manager – not a mid-level office manager like the manager of a bank, but a manager of civilization. You tell people what to do.

This elite directs the economy, the environment, technology, energy use, wealth distribution, interest rates, housing supply, land use, transportation, speech, public attitudes, equity, gender, mental health, diabetes, drug addiction and so on. Or at least, they try to. Managing these things often doesn’t work, of course, and frequently creates terrible outcomes. But that is beside the point.

The modern Leviathan: A massive administrative apparatus controls our lives in almost every way, such as (clockwise from top-left) the Canada Revenue Agency, RCMP, Department of Environment and Climate Change Canada, public health officials (shown at bottom right, Chief Public Health Officer Theresa Tam), the Truth and Reconciliation Commission, and local school boards (shown at middle left, headquarters for Toronto District School Board). (Sources of photos: (top left) Obert Madondo, licensed under CC BY-NC-SA 2.0; (middle left) PFHLai, licensed under CC BY-SA 4.0; (middle right) Transport Canada; (bottom left) Picasa; (bottom right) US Mission Geneva, licensed under CC BY-ND 2.0)

People believe in public management. Like the water in which fish swim, it is a conviction people don’t realize that they have. They accept without thinking about it that society requires an expert bureaucracy. Government exists to solve social problems for the common good. What else is it for? Most people believe this. Courts believe it. Politicians of all stripes believe it. The experts certainly believe it, for they are its high priests.

Even big business believes it. Capitalists have accepted their defeat. Now they help governments to manage the economy. In exchange, governments protect them from competition and provide public largesse. Large players are allowed to operate in regulated oligopolies in a system of crony corporatism, while small independent entrepreneurs get red tape and corrupted, unequal market competition.

But mostly everyone is on board. To speak against the administrative state is to be a heretic.

Not Rule OF Law but Rule BY Law

Some people imagine that they still live in a capitalist, liberal democracy that operates under the rule of law. They believe that people should be judged and advance based upon their individual merit. They believe that free markets produce the best outcomes. They believe in the moral virtue of individual initiative and hard work. Some insist that these values still reflect a social consensus.

These people are modern-day Luddites. We live in a managerial society. Individuality is anathema to its premise of managerial supremacy. Merit still makes an occasional appearance, but merit is a principle of the vanquished elite. Management is a collective enterprise. Individual initiatives, decisions and idiosyncrasies get in the way of central planning. Our modern system of government runs on broad discretion in the hands of a technocratic managerial class. Stellar individual achievement not only often goes unrewarded, but sometimes is actually feared and resented. Increasingly, corporations function this way as well.

Instead of the rule of law, we have rule by law. The two are very different. People sometimes think that the rule of law means that we must have laws. We do. We have lots of laws. We have laws dealing with everything under the sun. We have authorities making and enforcing them. These authorities act lawfully. But that is not a definitive characteristic of the rule of law. Virtually all states make sure to act lawfully – including some of the worst tyrannies. Even the Third Reich.

Simply having laws does not mean the rule of law; even the worst tyrannies maintain the forms of lawfulness while ignoring the essential aspect that laws are needed as much to restrain the unchecked behaviour of the state as to regulate the affairs of citizens. Pictured: (top left) a session of Nazi Germany’s “People’s Court”, 1944; (right) the constitution of the communist Soviet Union; (bottom left), the Supreme Court of communist North Korea. (Source of top left photo: Bundesarchiv, Bild 151-39-23, licensed under CC BY-SA 3.0 de)

Acting lawfully is not the test for the rule of law. Instead, the rule of law restricts what government can do. The rule of law means, for example, that laws are knowable, transparent, generally applicable and “fixed and announced beforehand”, as Hayek put it in The Road to Serfdom. Rule by law, in contrast, is legal instrumentalism, where governments use laws as tools to manage their subjects and achieve desirable outcomes. The rule of law and rule by law are incompatible.

Managers hate the rule of law. It gets in the way of crafting solutions to problems they perceive to be important. The rule of law is unquestionably inconvenient to those in government who just want to get things done – in the sense of creating new policies, writing new rules and passing new laws. The inconvenience of the rule of law is not its downside but its purpose: to prevent officials from making things up as they go. Which is why the tenets of the rule of law are fading away. Governments wish to be agile. They aim to respond to crises as they arise. Rules are fluid, ever-changing, and discretionary. Bureaucrats and even courts make one-off decisions that need not be consistent with the previous case. Instead of officials being bound by the law, they are in control of it and therefore above it. In a managerial age, that’s not “corruption” but an inevitable feature of the way things work.

New Brunswicker Gerald Comeau (top) got a stiff lesson in judicial sophistry after bringing beer across the provincial border; instead of confirming the Constitution’s clear proclamation that all goods must flow freely within Canada, the Supreme Court moved decisively to protect the regulatory state. At bottom, former Chief Justice Beverley McLachlin during the Comeau case. (Sources of photos: (top) Serge Bouchard/Radio-Canada; (bottom) CBC)

Courts are onside. The Supreme Court of Canada has made sure that the Constitution does not impede the administrative state. To cite just one example, in 2012 Gerald Comeau, a resident of New Brunswick, bought beer in Quebec. The RCMP ticketed him as he crossed the provincial border on his way home. Under a New Brunswick law, the New Brunswick Liquor Corporation has a monopoly on the sale of alcohol in the province. Comeau challenged the fine by citing section 121 of the Constitution Act, 1867, which requires free trade among the provinces. The section states, “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall…be admitted free into each of the other Provinces.”

But the Supreme Court feared that prohibiting trade barriers between provinces would threaten the modern regulatory state. If to be “admitted free” is a constitutional guarantee of interprovincial free trade, the Court trembled, then “agricultural supply management schemes, public health-driven prohibitions, environmental controls, and innumerable comparable regulatory measures that incidentally impede the passage of goods crossing provincial borders may be invalid.” Therefore, the Court said, provincial governments can impede the flow of goods across provincial borders for any reason, as long as limiting trade is not their “primary purpose”. So there you have it: “shall” and “be admitted free” actually mean the opposite of what you think they do.

So too with the Charter. The Supreme Court has held that the guarantee of equal treatment under the law in section 15(1) requires equal or comparable outcomes between groups. The B.C. Court of Appeal has held that the principles of fundamental justice in section 7 justify socialized medicine. The Ontario Divisional Court has held that professional regulatory bodies may order the political re-education of their members, notwithstanding section 2. The Supreme Court has held that administrative agencies may disregard freedom of religion in pursuit of the values of equity, diversity and inclusion. The Ontario Superior Court has held that prohibition of worship during Covid-19 that infringed freedom of religion was saved by section 1.

A rule-of-law document in a managerial age: Courts regularly interpret the Charter based on the values and social principles the administrative state seeks to advance, disregarding or reinterpreting provisions they find inconvenient – such as ruling that prohibition of religious worship during Covid-19 did not infringe on freedom of religion or association. (Sources of photos: (left) BeeBee Photography/Shutterstock; (right) The Canadian Press)

The Charter is a rule-of-law document in a managerial age. Courts are interpreting it in a manner consistent with managerial values.

We trusted that the institutions that rule over us – the legislature, the courts, the executive, the bureaucracy, the technocrats – would commit to their own restraint. We assumed that they would protect our liberty. We believed that vague language in constitutional documents would preserve our political order. All of that was a naïve mistake.

False Fixes

Constitutional rights are not enough. They merely carve out narrow and unreliable exceptions to the general rule that the state can do what it thinks best. They affirm the default assumption that the state’s power is unlimited. Our constitutional mistake cannot be fixed by better drafting.

Yes, section 2(b) of the Charter could have been more precise; but not all provisions are as vague as 2(b), and the Supreme Court has given its own meaning to sections more robustly worded than 2(b). Language, of course, has inherent ambiguities. Finding words that deal precisely with every future circumstance is impossible. Legal answers are rarely black-and-white. The process of applying general rules to specific facts requires interpretation, reasoning and argument, within which skilled jurists can bob and weave. Better wording would have improved our Constitution, but it would not have been enough to safeguard the rule of law and resist the managerial state. We need different constitutional premises.

A long line of philosophers, from the ancient Greek Socrates to the 20th century American John Rawls, have expressed the idea that populations agree to be ruled. There is a “social contract” between the ruled and their rulers. In exchange for their submission, governments provide the people with benefits, such as peace, prosperity and safety.

But it’s a chimera; no such social contract has ever existed. Citizens are never asked for their agreement. No one is permitted to opt-out. No one agrees on the extent of the authority, or on what the benefits are to be. Social contract theory is a fiction. Real contracts are voluntary, while (supposed) social contracts are involuntary. Involuntary consent is no consent at all. Even in the West, laws and governments coerce people against their will.

A Different Premise: Consent

The alternative is a legal order based upon actual, individual consent. That would mean that people could not be coerced or have force imposed upon them without their agreement. Since laws are based upon force, the state could not impose any other laws without the specific consent of each citizen subject to them.

These two principles would change everything.

If force was prohibited, then the law would consist of corollaries of that principle: rights and liabilities that protect person and property by prohibiting touching, physical restraint, confinement, medical treatment without informed consent, detention, confiscation, theft, the use of biological agents, breach of privacy, threats of force, and counselling, soliciting or inducing others to use force; that keep the peace; that compensate for physical harm; that enforce partially executed contracts; and so on. The only exceptions to the prohibition on force would be in response to the use of force: to repel force in self-defence and to execute and enforce laws prohibiting force. No one, including the state, could use force or impose other rules for the common good, public necessity or emergency.

Many questions would arise. How would courts enforce these principles? What happens when different people consent to different sets of other laws? Taxes require coercion, so how would the state fund itself if citizens could refuse to be subject to tax laws? These and many more challenges can be answered in a principled way. But they are for another day.

What we do know: the existing constitutional order is failing. Instead of protecting liberty, the state has become its leading threat. It is time to fix our constitutional mistake.

Bruce Pardy is executive director of Rights Probe and professor of law at Queen’s University. You can reach him at [email protected] or on Twitter @PardyBruce.

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Crime

Mexican cartels are a direct threat to Canada’s public safety, and the future of North American trade

Published on

From the Macdonald Laurier Institute

By Gary J. Hale for Inside Policy

RCMP raided a fentanyl ‘superlab’ in Falkland, BC, with ties to a transnational criminal network that spans from Mexico to China.

On October 31, residents of Falkland, BC, were readying their children for a night of Halloween fun. Little did they know that their “quaint, quiet, and low-key little village” was about to make national headlines for all the wrong reasons.

On that day, RCMP announced that it had raided a fentanyl “superlab” of scary proportions near Falkland – one that police called the “largest and most sophisticated” drug operation in Canada. Officers seized nearly half-a-billion-dollars’ worth of illicit materials, including 54 kilograms of finished fentanyl, 390 kilograms of methamphetamine, 35 kilograms of cocaine, 15 kilograms of MDMA, and six kilograms of cannabis” as well as AR-15-style guns, silencers, small explosive devices, body armour, and vast amounts of ammunition.

They also found massive quantities of “precursor chemicals” used to make the drugs. This strongly suggests that the superlab was tied into a transnational criminal network that spans from Mexico to China – one that uses North America’s transportation supply chains to spread its poisonous cargo across Canada and the United States.

The Canada-US-Mexico relationship is comprised of many interests, but the economic benefits of trade between the nations is one of the driving forces that keep these neighbours profitably engaged. The CUSMA trade agreement is the successor to NAFTA and is the strongest example globally of a successful economic co-operation treaty. It benefits all three signatories. This level of interdependence under CUSMA requires all parties to recognize their respective vulnerabilities and attempt to mitigate any threats, risks, or dangers to trade and to the overall relationship. What happens to one affects all the others.

The supply chain, and the transport infrastructure that supports it, affects the balance books of all three. While the supply chain is robust and currently experiences only occasional delays, the different types of transport that make up the supply chain – such as trucks, trains, and sea-going vessels – are extremely vulnerable to disruption or stoppages because of the unchecked violence and crime attributed to the activities of Mexican Transnational Criminal Organizations (TCOs). These cartels operate throughout Mexico, from the Pacific ports to the northern plains at the US-Mexico border.

The sophistication of the Falkland superlab strongly suggests connectivity to multi-national production, transportation, and distribution networks that likely include China (supply of raw products) and Mexico (clandestine laboratory expertise).

For most Canadians, Mexican cartels call to mind the stereotypical villains of TV and movie police dramas. But their power and influence is very real – as is the threat they pose to all three CUSMA nations.

Mexico’s cartels: a deadly and growing threat

Mexican cartels started as drug trafficking organizations (DTOs) in the 1960s. By the late 1990s they had evolved to become transnational enterprises as they expanded their business beyond locally produced drugs (originally marijuana and heroin) to include primarily Colombian cocaine that they transported through Mexico en route to the US and Canada.

Marijuana and the opium poppy are cultivated in Mexico and, in the case of weed, taken to market in raw form. While the cartels required some chemicals sourced from outside Mexico to extract opium from the poppy and convert it into heroin, the large-scale, multi-ton production of synthetic drugs like Methamphetamine and today Fentanyl expanded the demand for sources of precursor chemicals (where the chemical is slightly altered at the molecular level to become the drug) and essential chemicals (chemicals used to extract, process, or clean the drugs.)

The need to acquire cocaine and chemicals internationalized the cartels. Mexican TCO’s now operate on every continent. That presence involves all the critical stages of the criminal business cycle: production, transportation, distribution, and re-capitalization. Some of the money from drug proceeds flow south from Canada and the US back to Mexico to be retained as profits, while other funds are used to keep the enterprise well-funded and operational.

In Mexico, the scope of their activities is economy-wide; they now operate many lines of criminal business. Some directly affect Mexico’s economic security, such as petroleum theft, intellectual property theft (mainly pirated DVDs and CDs), adulterating drinking alcohol, and exploiting public utilities. Others are in “traditional” criminal markets, such as prostitution, extortion, kidnapping, weapons smuggling, migrant smuggling and human trafficking. Organized auto theft has also become another revenue stream.

Criminal Actors

The Cartel de Sinaloa (CDS or Sinaloa Cartel) and the Cartel Jalisco Nueva Generacion (CJNG) are the two principal TCO’s vying for territorial control of Mexico’s air, land, and maritime ports, as well as illegal crossing points. These points on the cartel map are known as “plazas,” and are often between formal ports of entry into the US. By controlling territories crucial for the inbound and outbound movement of drugs, precursors, people, and illegal proceeds, the cartels secretly transport illicit goods and people through commercial supply chains, thus subjecting the transportation segment of legitimate North American trade to the most risk.

That is giving the cartels the power to impair – and even control – the movement of Mexico’s legitimate trade. While largely kept out of the public domain, incidents of forced payment of criminal taxation fees, called “cuotas,” and other similar threats to international business operations are already occurring. For instance, cuotas are being imposed on the transnational business of exporting used cars from the US to Mexico. They’re also being forced on Mexican avocado and lime exporters before the cartels will allow their products to cross the border to the US and international markets. This has crippled that particular trade. Unfortunately, the Mexican government has been slow to react, and the extortion persists throughout Mexico. It is worth repeating – these entirely legitimate goods reach the market only after cartel conditions are met and bribes paid.

The free trade and soft border policies of the US of recent years have allowed cartel operatives to enter that country and work the drug trade with limited consequence. In May, the U.S. Drug Enforcement Administration (DEA) published the National Drug Threat Assessment 2024, where it reported that the Jalisco and Sinaloa cartels operate in all 50 US states and are engaged in armed violence in American cities as they fight for market shares of the sales of Methamphetamine, Fentanyl, and other drugs sourced from Mexico.

The DEA’s findings should sound alarms in Canada. Canada and the US have similar trade and immigration policies, which allow the Mexican cartels to easily enter and control the wholesale component of the drug trade. The long-term effects of the drug trade are the billions of dollars gained that allow for the corruption of government officials. Canada should be on guard: Mexican drug cartels in Canada could begin to not only kill ordinary Canadians by knowingly selling them deadly drugs like Fentanyl – their operatives can also embed themselves in Canadian society, as they have in the US, leading to ordinary citizens on Canadian streets being victimized by the armed violence cartels regularly use to assert their position and power.

Organized crime and Mexican governance

Canada faces these threats directly, but the indirect ones that the cartels present to Mexican governance are no less consequential to Canada in the long term – and likely sooner. Illicit agreements between corrupt Mexican government officials and the cartels assure that the crime organizations retain control of territory and have freedom to operate.

That threat is becoming increasingly existential. Cartel fighters are well disciplined, well equipped and strong enough to challenge Mexico’s military, currently the government’s main tool to fight them. Should the TCOs come to dominate Mexican society or gain decisive influence over government policy, Mexico’s government risks being declared a narco-democracy and the US may come to see the cartels as a threat to national security. That in turn could lead to a US military intervention in Mexico – not an outcome desired by either side.

While that scenario may be considered extreme, it is not as far from reality as many may think. While in many respects the US-Mexico trading relationship remains unchanged, the overall political context has become testy – and could be a real flashpoint for the incoming Trump administration.

Political developments in Mexico have played a role. After his election in 2018, former Mexican President Andrés Manuel López Obrador (commonly referred to his initials, AMLO) demonstrated a disdain for all things North American. This included frequent complaints of US interference or violation of Mexican sovereignty – complaints that were more about keeping Mexican government domestic actions out of the public eye. To retain a shroud of secrecy over government corruption, Mexico under Amlo started in 2022 to limit the activities and numbers of US federal law enforcement agencies operating there, particularly the FBI, DEA, ATF and ICE. These agencies formerly enjoyed a close relationship with the Mexican Federal Police – a force AMLO disbanded and replaced with the National Guard. The AMLO administration reduced the number of US assets and agents in Mexico, particularly singling out the DEA for the most punitive restrictions.

During his administration, AMLO placed the army and navy in charge of all ports of entry and gave them responsibility for all domestic public safety and security by subordinating the Guardia Nacional (GN), or National Guard, to the army. The GN, the only federal law enforcement agency, has been taken over by military officials who are sometimes corrupt and in league with the cartels.

Mexican President Claudia Sheinbaum, who took office in 2024, has continued AMLO’s organizational moves. Sheinbaum comes from the same political party and has so far extended carte blanche to the military, whose administration is opaque and now operates with impunity, under the guise of “national security” and “sovereignty” concerns.

It is expected that Sheinbaum will continue to shield American eyes from Mexico law enforcement and judicial affairs. The fear in the US law enforcement and national security community is that Sheinbaum may even declare DEA non grata, much as then Venezuelan President Hugo Chavez in 2005 and Bolivian President Evo Morales in 2008 did in their countries. Both were anti-American leftists of the same mindset as AMLO and Sheinbaum, who feared detection of their connections to the illegal drug trade.

Sheinbaum has publicly demonstrated disinterest in the consistent application of the rule of law against the TCOs by stating that she will continue the “hugs not bullets” (“abrazos, no balazos”) non-confrontational, non-interventional posture towards organized crime. Agreements with corrupt government officials will allow the cartels to expand their business and to operate with impunity. Through intimidation, bribery, and murder, the cartels affect decision making at the municipal, state, and federal levels of Mexican government. That leverage, while performed outside the public eye, has the potential to negatively affect supply and demand among the three countries at the very least, and at worst, to signal that cartels in Mexico are directly or indirectly involved in the formulation of government security, immigration, drug, and trade policy.

AMLO enacted constitutional changes that will provide Sheinbaum with the powers of a dictator, giving her administration unchecked control of the executive, legislative, and judicial branches of government. As a result, the judiciary in Mexico is in crisis mode with 8 of 11 Supreme Court Justices resigning in October 2024 to protest the unconstitutional disregard for due process that started with AMLO and continues with Sheinbaum thanks to a “voting for judges” law that she and AMLO have rammed into operation without debate. This development portends even more corruption.

Without the existence of an independent judicial system, these institutional changes could give pause to US and Canadian negotiators when it comes time to renew CUSMA in 2026.

Beyond 2025: Mexican organized crime as a threat to the US and Canada, and Greater North American implications

Most worrying, the cartels will be in a yet stronger position to affect and even dictate the pace and volume of legitimate trade between the US and Mexico under Sheinbaum. This makes Mexico the weakest link among the three CUSMA members.

The US and Canada should therefore be concerned about the strength and power of the cartels because the current trajectory could provide them a greater role in Mexico’s performance as a trade partner. Should this trend continue, the US would likely begin to see Mexico through the lens of a threat to critical components of its national security: 1) the public safety of US citizens being killed in epidemic proportions by the drugs produced by citizens of Mexico; 2) the negative impact or increased cost of commerce that supplies goods to the American market; and 3) the CUSMA relationship that sustains the economic strength of all three participating countries.

This worrisome evolution requires proactivity by Canada and the US to insist that Sheinbaum reverse the gains that the cartels have made to influence policy and erode the government’s monopoly on territorial control and the use of violence, and reverse Mexico’s limits on drug enforcement co-operation with what should be its partners to the north. Pressure should also be applied to demand a return to a drug policy model that includes international law enforcement co-operation and a continuation towards the transformation of the Mexican judicial system from a mixed inquisitorial or accusatorial system to an adversarial system that employs the use of juries, witness testimony, oral hearings and trials, and cross-examination of witnesses, as opposed to a system where cartel-influenced elections could dictate judicial outcomes.

The implications of the further development of a Mexico narco-democracy for US-Mexico-Canada relations would be devastating. Co-operation on public safety and security would cease completely, allowing the cartels to take full control of commercial supply lines, significantly reducing trade between the three nations – likely causing the CUSMA trade deal to fracture until governance returned to duly elected civilian officials.

Continental security and Canada’s contribution

The continued success of CUSMA lies with Mexico more than any other country. Should Mexico continue on its path to autocracy, it could upset the trade deal, crucial to the prosperity of all three countries. Canada is not immune from what on the surface may appear to be mostly bilateral, US-Mexico issues, because, regardless of the commodity – whether it’s consumables or manufactured items – the cartels are positioned and empowered to affect imports, exports, trade, and migration throughout North America.

For the foreseeable future, Mexico is not going to voluntarily change its security posture. This enables the cartels to remain persistent threats, especially to trade. Canada and the US need to continue to jointly insist that Mexico take a stronger stance against organized crime and that it take steps to strengthen the judiciary and the rule of law in that country.


Gary J. Hale served 31 years in the Drug Enforcement Administration (DEA), retiring as an executive-level intelligence analyst. In 2010, he was appointed as Drug Policy fellow and Mexico Studies Scholar at the James A. Baker III Institute for Public Policy at Rice University in Houston, Texas.

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Broken ‘equalization’ program bad for all provinces

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From the Fraser Institute

By Alex Whalen  and Tegan Hill

Back in the summer at a meeting in Halifax, several provincial premiers discussed a lawsuit meant to force the federal government to make changes to Canada’s equalization program. The suit—filed by Newfoundland and Labrador and backed by British Columbia, Saskatchewan and Alberta—effectively argues that the current formula isn’t fair. But while the question of “fairness” can be subjective, its clear the equalization program is broken.

In theory, the program equalizes the ability of provinces to deliver reasonably comparable services at a reasonably comparable level of taxation. Any province’s ability to pay is based on its “fiscal capacity”—that is, its ability to raise revenue.

This year, equalization payments will total a projected $25.3 billion with all provinces except B.C., Alberta and Saskatchewan to receive some money. Whether due to higher incomes, higher employment or other factors, these three provinces have a greater ability to collect government revenue so they will not receive equalization.

However, contrary to the intent of the program, as recently as 2021, equalization program costs increased despite a decline in the fiscal capacity of oil-producing provinces such as Alberta, Saskatchewan, and Newfoundland and Labrador. In other words, the fiscal capacity gap among provinces was shrinking, yet recipient provinces still received a larger equalization payment.

Why? Because a “fixed-growth rule,” introduced by the Harper government in 2009, ensures that payments grow roughly in line with the economy—even if the gap between richer and poorer provinces shrinks. The result? Total equalization payments (before adjusting for inflation) increased by 19 per cent between 2015/16 and 2020/21 despite the gap in fiscal capacities between provinces shrinking during this time.

Moreover, the structure of the equalization program is also causing problems, even for recipient provinces, because it generates strong disincentives to natural resource development and the resulting economic growth because the program “claws back” equalization dollars when provinces raise revenue from natural resource development. Despite some changes to reduce this problem, one study estimated that a recipient province wishing to increase its natural resource revenues by a modest 10 per cent could face up to a 97 per cent claw back in equalization payments.

Put simply, provinces that generally do not receive equalization such as Alberta, B.C. and Saskatchewan have been punished for developing their resources, whereas recipient provinces such as Quebec and in the Maritimes have been rewarded for not developing theirs.

Finally, the current program design also encourages recipient provinces to maintain high personal and business income tax rates. While higher tax rates can reduce the incentive to work, invest and be productive, they also raise the national standard average tax rate, which is used in the equalization allocation formula. Therefore, provinces are incentivized to maintain high and economically damaging tax rates to maximize equalization payments.

Unless premiers push for reforms that will improve economic incentives and contain program costs, all provinces—recipient and non-recipient—will suffer the consequences.

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