Policy change and the politics of ideas: the emergence of the Canada/Quebec pension plans.

Babich, Kristina ; Beland, Daniel

IN RECENT YEARS, A GROWING NUMBER of scholars have put forward theoretical frameworks aimed at explaining policy change in advanced industrial societies (e.g., Campbell 2004; Hacker 2004; Thelen 2004). A major aspect of this debate on the sources of policy change is the claim that ideas can directly impact key policy decisions (Blyth 2002; Campbell 2004; Cox 2001; Lieberman 2002; Schmidt 2002). Using the example of the emergence of the Canada and the Quebec Pension Plans (C/QPP), this article shows how paying systematic attention to ideas can enrich the study of policy change without necessarily downplaying the potential role of other factors like political institutions and electoral competition.

Adopted in 1965, the C/QPP provide earnings-related pensions to workers aged 65 and older. With a replacement rate of only 25 percent, the C/QPP are modest public pension programs that leave much room for private savings and occupational pensions (e.g., Beland and Myles 2005; Boychuk and Banting 2008; Myles 1988a). The aim of this article is to shed new light on the creation of the C/QPP by answering two closely related questions: in the mid-1960s, why did the federal government decide to create an earnings-related public pension system on the top of the existing flat-rate pension (Old Age Security [OAS])? Second, and more specifically, why did that system feature a higher than initially proposed replacement rate and a separate scheme for the province of Quebec? In order to answer these questions, the article proposes an analysis of the debates leading to the enactment of the C/QPP. Taking into account the interaction between federalism, electoral competition, and changing social policy ideas at both the federal and the provincial levels, this systematic analysis stresses the direct impact of ideas on policy change as well as the electoral and institutional conditions under which new policy ideas are more likely to shape concrete political decisions. Overall, the article suggests that, in order to explain policy change better, researchers should pay closer attention to policy ideas and to the electoral and institutional conditions under which new ideas can shape such decisions.

Four sections comprise this article. The first section reviews the relevant literature on policy change before suggesting that turning to ideas can help explain this type of change, especially when one recognizes how such ideas can interact with factors like federalism and electoral competition. (1) The second section presents historical background about pension reform in Canada from the 1920s to the early 1950s. Focusing on electoral competition and changing social policy ideas, the next section offers a discussion of major debates and events leading to the enactment of the C/QPP in 1965. As for the final section, it covers the role of two sets of forces that strongly impacted this enactment process: federalism and provincial influence; and changing ideas about social policy and the role of the state, at both the federal and the provincial level, especially in Quebec. (2)

THEORETICAL ISSUES

Since the 1980s, historical institutionalism has emerged as one of the most prominent approaches to understanding policy development in advanced industrial societies (e.g., Immergut 1998; Skocpol 1992; Steinmo, Thelen, and Longstreth 1992; Weaver and Rockman 1993). (3) This influential approach is rooted in the assumption that historically constructed institutions like federalism create political opportunities and obstacles that strongly impact the behavior of policymakers and interest groups. In other words, historical institutionalism "understands political activities, whether carried out by politicians or by social groups, as conditioned by institutional configurations of governments and political party systems" (Skocpol 1992:41). Unlike organizational or rational choice institutionalism, historical institutionalism focuses on political institutions and the impact of past decisions on policymaking (Campbell 2004; Hall and Taylor 1996). In the field of social policy, these past decisions largely shape the changing balance between public and private benefits (Beland and Gran 2008; Hacker 2002; Howard 1997; Klein 2003). (4)

Starting from this theoretical framework, a number of historical institutionalist scholars have improved out understanding of social policy development (e.g., Amenta 1998; Maioni 1998; Orloff 1993; Pierson 1994; Skocpol 1992). One widely acknowledged problem with most of the early historical institutionalist scholarship is its relative inability to explain palicy change beyond the well-known claire that exogenous shocks like the Great Depression can bring about major policy transformations (Campbell 2004; Hacker 2004; Thelen 2004). In response to this problem, a growing number of sociologists and political scientists have turned to the study of ideas in order to explain policy change (e.g., Bhatia and Coleman 2003; Blyth 2002; Campbell 2004; Hall 1993; Jenson 1989; Lieberman 2002; Parsons 2007; Schmidt 2002; Walsh 2000). For these authors, ideas and institutions interact with changing economic and electoral circumstances to shape policy change through paradigm shifts and framing processes that help construct the "need to reform" (Cox 2001).

Recent scholarship on policy ideas sheds light on the complex relationship between interest formation, political mobilization, and policy change. For example, in a major book, Mark Blyth (2002) argues that, in periods of acute uncertainty, shared ideas about how the social and economic world operates impact the ways political actors assess what their interests are. For Blyth, ideas are especially crucial to understanding policy change because they help actors reduce the acute political uncertainty that calls into question existing institutional arrangements. When these arrangements become unable to reduce uncertainty, actors are likely to turn to new policy ideas capable of defining a proper course of action leading to the emergence of alternative, stable institutions. As argued in this article, electoral competition, alongside economic trends like inflation, can become a major source of uncertainty that forces experts and politicians to question existing policy commitments and put forward new ideas about what the proper course of action is. Far from being purely external to electoral competition and strategies, ideas give meaning these strategies while helping actors select what they believe is the best course of action. Recognizing the role of ideas does net mean that political actors de net engage in strategic behavior but that such actors must give meaning to the options available to them in order to reduce the economic and political uncertainty they face. This claim is consistent with the literature on "bounded rationality" and policy change, which stresses the fact that strategic actors face cognitive and normative biases that impact their decisions and strategies (Weyland 2007). In such a context, policy ideas help actors define the most effective ways to achieve their goals. Such "causal beliefs" (Goldstein and Keohane 1993) concern both policy deliberations (what is the best policy alternative to solve a given social and economic problem?) and electoral strategies (what is the best way to gain more popular support in a given electoral context?), which intersect in the real world.

The alternative explanation criticized in this paper is the claim that electoral competition between actors could automatically lead to concrete policy choices. From this perspective, policy ideas would be nothing more than epiphenomenal, as they would simply reflect the electoral strategies of political actors. What this article suggests is that electoral competition simply exacerbated political uncertainty and helped delegitimize old policy ideas, which pushed federal politicians, especially Liberals, to construct the "need to reform" while adopting new policy alternatives capable of improving their electoral stance. As argued, the selection of these policy ideas is the result of ideational processes that helped actors draw lessons from existing policy legacies, shape a clear path for reform, and agree on the specific characteristics of what would become the C/QPP.

Finally, drawing on historical institutionalism, the empirical analysis suggests that an institutional factor like federalism impacted these policy debates, notably by allowing the ideas of provincial leaders like Quebec Premier Jean Lesage to shape policy outcomes. From this angle, ideational and institutional logics can converge to empower specific actors and affect policy development (Beland and Hacker 2004; Campbell 2004; Lieberman 2002; Schmidt 2002; Walsh 2000). As evidenced below, recognizing that ideas can shape key political decisions does not mean that institutional factors like federalism become irrelevant to understanding policy change. Instead, political institutions create windows of opportunity for new policy ideas to enter the decision-making process. Overall, there are electoral and institutional conditions under which new policy ideas are more likely to impact major political decisions.

HISTORICAL BACKGROUND

In Canada, institutional fragmentation stemming from federalism (Banting 1987) and the enduring weight of free market ideas (Bryden 1974) appeared as major obstacles to the development of federal social policy during the first three decades of the twentieth century in Canada (Guest 2003). This is true despite the seemingly modest development of private pension benefits during these decades (Carmichael 2005). As for the provinces, the British North America Act of 1867 (BNA Act) gave them jurisdiction over social policy, including old age benefits, meaning that federal policymakers could not unilaterally implement a purely federal old age assistance scheme. However, facing growing social needs, the provinces did not have the fiscal means to implement adequate social assistance programs for the aged (Bryden 1974). Largely because of the constitutional obstacles facing federal policymakers, the 1927 Old Age Pension Act created a federally subsidized yet provincially administrated means-tested pension available only to needy British subjects (5) aged 70 and older with at least 20 years of residence in Canada. Initially, the provinces had to finance 50 percent of the CDN$20 per month pension. After 1931, however, in order to encourage poorer provinces to participate in the program, the federal contribution was increased to cover 75 percent of the costs. In the end, all the provinces decided to participate in the program (Banting 2005). (6) This decentralized program stayed in place without major changes until 1951.

During the 1930s and 1940s, a number of prominent actors like the Canadian Manufacturers' Association supported the development of an earnings-related pension scheme in Canada (Bryden 1974:120). Already well known in Europe and in the United States, where Congress enacted such a program in 1935 (Beland and Hacker 2004), this idea was even featured prominently in the 1943 Marsh Report on Social Security for Canada (Marsh 1943:74-79). Yet, by the early 1950s, support for this idea had faded, "reflecting a growing belief that relating benefits to contributions would pose unnecessary complex administrative problems and would deter the abolition of the means test far too long" (Bryden 1974:120). It was only much later in the decade that this idea would become a major political issue in Canada.

Meanwhile, in 1951, the federal government secured a constitutional amendment that allowed Ottawa to develop a centralized and purely federal public pension scheme. Following this amendment, the House of Commons adopted the OAS program, a purely federal, universal fiat-rate pension covering Canadian citizens aged 70 and older. As for the elderly poor aged between 65 and 69, they were eligible for means-tested protection under the Old Age Assistance Act (Bryden 1974). The idea that private savings and occupational pensions were the primary and most legitimate source of old-age security in Canada (Myles 1988a) remained dominant. Consequently, OAS only provided a CDN$40 monthly pension that left much room for the development of private savings. Recognizing the modest nature of this pension, labor officials and left-wing federal politicians like Stanley Knowles of the pro-labor Co-operative Commonwealth Federation (CCF) strongly lobbied for its increase (House of Commons Debates [Hansard], October 25, 1951).

Further evidence of the dominant ideological preference toward private pensions and personal savings is the tax scheme and trust fund used to finance OAS. These provisions were enacted in order to emphasize the specific cost of public pensions and the idea that "Canadians should have a direct and conscious financial responsibility" (Douglas Abbott, House of Commons [Hansard], October 25, 1951:387). (7) Overall, the advent of OAS increased the role of the federal government in pension policy but did not challenge the prevailing idea that personal savings and private pensions should dominate the field of income security for the elderly. Focusing on the late 1950s and early 1960s, the following section will explore the role of electoral competition and changing ideas about public and private benefits in the construction of the federal pension agenda.

ELECTORAL COMPETITION AND CHANGING IDEAS ABOUT THE ROLE OF THE STATE

Despite its limitations, the 1951 federal pension reform marked a significant turning point in the development of public pensions in Canada. As for private pensions, the 1950s was an era of expansion and optimism. Studies printed in Labour Gazette supplements in 1954 and 1955 revealed that out of 411 firms with 500 plus employees, 176 had earnings-related pensions and 38 had noncontributory pensions. They further showed that 69 percent of Canadian workers were employed by establishments operating a pension plan (Department of Labour 1954, 1956). However, these plans did not necessarily cover all employees, and they were restrictive with regard to portability and vesting rights. As a result, such plans restricted labor mobility and offered limited security to workers. Labor officials pressured the federal government to take a greater role in improving the protection these workers received without restricting labor mobility. The Canadian Congress of Labour asked "the federal government to establish an 'Industrial Pension Plan' that would allow pension plan credits to accrue irrespective of the number of employers a worker had been with" (Department of Labour 1954:1407). As for the pro-labor party, the CCF, they lobbied for greater security for all Canadians; and stressed the need for more generous OAS benefits: "we believe that the amount of the old age pension should now be increased to not less than $60 a month, and we feel that the means test should be removed at age 65" (Stanley Knowles, House of Commons [Hansard], June 19, 1954:6300).

Despite calls from the labor movement for progressive pension reform, the pension question did not become a major political issue until the late 1950s, when changing economic and financial conditions as well as tierce electoral competition ushered pension reform to the top of the federal political agenda.

First, in the absence of automatic indexation, beginning in 1956, rising inflation helped left-leaning actors construct the "need to reform" the existing public pension system (Finkel 2006). (8) Even federal Progressive Conservative leader John Diefenbaker recognized the negative impact of inflation on pensioners: "No one can deny that the level is such that many of our old age pensioners find themselves in an impossible position. The reason for it, of course, is simply this: while Canada has in circulation more and more dollars, those dollars buy less and less" (House of Commons [Hansard], June 27, 1956:6536). Months later, the Liberal government created the registered retirement savings plans (RRSPs). RRSPs "allowed Canadians to invest, tax-free, a defined portion of their income each year in private retirement plans" (Finkel 2006:157). Believed to help curb inflation and increase personal savings, this new federal program implicitly promoted the development of state-subsidized private savings rather than any bold expansion of the existing Canadian public pension system.

Second, intense electoral competition helped transform pension reform into a major issue in federal politics. The federal election of June 1957 was a significant turning point in Canadian politics as it marked the end of a 22-year Liberal Party reign. In January 1957, anticipating the forthcoming federal election, Liberal Finance Minister Walter Harris announced that the federal government would increase the OAS fiat-rate pension by 15 percent, "from $40 a month to $46 a month" (House of Commons [Hansard], January 22, 1957:2222). Despite this, the Liberals suffered a staggering defeat at the hands of Diefenbaker's Progressive Conservatives, whose minority government was partly due to their criticism of the Liberal's modest increase to OAS. Later securing a majority government in 1958, the Progressive Conservatives boosted the value of the federal fiat-rate pension by another CDN$9 a month, raising the total monthly benefit to CDN$55. (9)

Debates revolving around the issue of occupational pensions did not dissipate with the introduction of RRSPs and the increase in OAS benefits. A growing number of political actors referred to the perceived limitations of private pensions in order to legitimize the need for a national earnings-related pension scheme. After discussing the limitations of private plans, for example, CCF federal MP Herbert Herridge made a case for the creation of a public earnings-related scheme: "We really need some form of national contributory pension plan on a general basis so that from an early earning age until time of retirement people can look forward to a decent income during their retirement years" (Herbert Herridge, House of Commons [Hansard], November 1, 1957:2161). Counter arguments endorsing the domination of private social policy were made by the Liberals, who explicitly supported the growth of private pensions. For example, Liberal MP James Sinclair argued that the public pension provision was never meant to offer more than a subsistence level of support and that the private sector should take the lead in providing income security to retired workers and their families: "over the years ... the government has urged people not to depend on the government in their old age and encouraged people to make provision for their retirement.... Encouragement was given of company pension schemes by making the contributions of both the employees and the employers tax deductible" (House of Commons [Hansard], October 31, 1957:636).

By 1960, considerable changes in the pension policy debate had occurred; both the CCF and the Liberal Party presented proposals for national contributory pensions. The CCF proposal received the support of labor officials who favored the idea of a national earnings-related pension scheme (House of Commons [Hansard], July 19, 1960). (10) In July 1960, the Liberals presented their plan, which included an increase in OAS benefits (to CDN$75 per month), the development of survivor benefits as part of OAS, the regulation of private pension plans to guarantee vesting rights and pension portability, and a national earnings-related scheme that could be integrated with existing private pension plans (House of Commons [Hansard], July 19, 1960). The Liberal plan for pension reform represented a major ideological shift toward public pensions, specifically public earnings-related pensions. Although the CCF had been holding this position for some rime, the proposal supporting the expansion of benefits and the implementation of a national earnings-related scheme constituted a new position for the Liberal Party. Only three years earlier, the party had explicitly encouraged the growth of private pensions over public benefits. This shift toward public pensions was related to a Liberal quest for new policy ideas triggered by the intensified federal electoral competition that characterized the late 1950s and the early 1960s.

To understand the change in Liberal policy ideas, one needs to go back to the late 1950s. In the aftermath of the 1957 and 1958 federal elections, it became increasingly clear to the Liberal party that they needed to put forward new policy ideas to increase its popular support. Well aware that the cautious policy approach of the Liberal Party during the St. Laurent era was not longer viable (or publicly desirable), Liberals looked for a bolder policy platform aimed at generating increased electoral support for their party. In this context, according to P.E. Bryden (1997:40), the emergence of a "new generation of Liberals" gradually steered the Liberal Party into a new policy direction, which prominently featured progressive social policies. In the fall of 1960, for example, Pearson called for a conference to facilitate "free, frank, and informed discussion of the sorts of policy options open to a Liberal government" (Bryden 1997:55). Closed to politicians in order to let reformers put forward innovative policy ideas, the Kingston conference, as it was known, helped make progressive social policy ideas more prominent within the Liberal agenda. However, more established Liberal party members from the St. Laurent era were resistant to the new ideas flowing from the Kingston conference. It required considerable persistence on the part of the new generation Liberals to convince the stalwarts of the old regime that social policy expansion was the new path to political success (Bryden 1997).

The Kingston conference was a pivotal moment for Liberals as it helped transform their party's social policy agenda (Bryden 1997). The organizers and presenters put forward broad ideas about social policy that would later flourish within and beyond the Liberal Party. For example, former Canadian Tax Foundation Chair Monteath Douglas, aimed to reconfigure the way policy planners saw old age dependency. Douglas argued that policy planners must expand old age assistance benefits to include those below age 69 in order to reach all the elderly people truly in need (Bryden 1997:58). Offering a more comprehensive vision, Tom Kent brought a coherent and universalistic social security approach to the stage. His vision of social policy was centered on comprehensive programs covering major social risks ranging from old age dependency to limited access to health care. At the most general level, the Kingston conference offered a forum to discuss new policy ideas that were typically embedded in a more ambitious and statist social policy model that challenged the managerial and seemingly conservative approach that had dominated the St. Laurent years. The growing domination of this model created the conditions for a bolder policy platform capable of "rejuvenating the Liberal Party" (Bryden 1997:55).

In 1962, with a federal election in sight, the Liberal Party centered its new social policy platform on old age pensions, which "had become the bailiwick of the most influential politicians" (Bryden 1997:70). The plan they devised was a national contributory scheme that would develop on top of OAS. Liberal officials felt that pension policy was the perfect venue to showcase their bolder, progressive vision in the context of cooperative federalism and the constitutional need to secure provincial support for any new national pension program. Overall, the shift in policy ideas within the Liberal Party leading to its official support for earnings-related pensions emerged as the result of intense and long policy debates within the party. From this perspective, electoral competition stimulated new Liberal policy thinking but, in itself, such competition did not automatically shape its content (Bryden 1997).

The final major turning point in the emergence of public earnings-related pensions in Canada came about through the 1962 and 1963 federal elections. These two consecutive elections kick started the development of what would become C/QPP by further increasing the profile of pension reform as a major political issue in Canada. Liberals started an intense policy debate when they outlined their plan for a national earnings-related pension as part of their 1962 electoral platform. "It would start with a 1 percent contribution [slowly increasing to provide a 30 to 35 percent replacement rate], [and] a national minimum of $75 for those over 70" (The Globe and Mail, January 10, 1962:01). Progressive Conservatives argued that an earnings-related plan would place an unnecessary burden on private industry and that an earnings-related plan on top of a private industry pension would overpay pension benefits (House of Commons [Hansard], February 6, 1962). To that, the Liberals retorted that a national earnings-related pension would leave ample room for private savings and pensions: "Our plan is a supplement to private saving ... while many companies now have good pension schemes, the majority of the working population is not covered by them" (House of Commons [Hansard], February 6, 1962:588). Throughout the debate over earnings-related pensions, Progressive Conservatives voiced a preference for more generous fiat-rate pensions that reflected their reluctance to support the creation of a public earnings-related scheme.

The 1962 election saw the Progressive Conservatives reduced to minority government status. That year, Parliament increased the OAS pension to CDN$65 (The Globe and Mail, February 6, 1962). Yet, the Liberals argued that pension reforms should be more expansive and comprehensive. In the same inspiration as their own pension reform proposal, they put forward an earnings-related scheme, extending benefits to unmarried women and widows, and lowering the qualifying age for OAS, all to improve the federal pension system (Hubert Badanai, House of Commons [Hansard], February 6, 1961:1776-77).

In April 1963, Liberals returned to power with a minority government. Much like in 1956 and 1957, intense political competition over social policy issues, including pension reform, took place. During the 1963 electoral campaign, Liberals had promised to produce a proposal to "tackle the nation's problems with vigor" within 60 days of election (Bryden 1974:144). After their electoral victory, Liberals began to add more detail to their plan for a national earnings-related pension. What emerged was a contributory scheme stacked on top of a universal monthly OAS benefit of CDN$75. By June 19, the Liberal's proposal was complete (Simeon 1972). The proposal, labeled a House of Commons White Paper, outlined the resolution presented in the House of Commons on July 18, 1963 (House of Commons [Hansard], July 18, 1963). This plan proposed a pay-as-you-go system with a payroll tax rate of only 1 percent and made provision for a 10-year transition period, after which 30 percent of average earnings would be paid out to eligible workers (Bryden 1974).

This section has shown that, in a context of intense electoral competition, changing ideas about the role of the state and Liberal electoral strategies helped construct the need for pension reform while propelling the issue of earnings-related pensions to the forefront of the federal policy agenda. As argued in the following section, the key role of Quebec in the reform process itself can only be understood when close attention is paid to changing policy ideas about nation-building and the role of the state in the province. The interaction between federalism and these changing ideas largely explain why Quebec successfully reshaped the Canadian pension debate in the mid-1960s.

THE POLITICS OF FEDERALISM AND CHANGING POLICY IDEAS IN QUEBEC

In the field of old age pensions as in other areas, the Canadian federal system allows for the direct participation of provinces in national-level policy debates. This institutional reality provides a window of opportunity for provincial leaders to put forward new ideas that could end up impacting the content of federal legislation. This is exactly what happened as far as the enactment of the Canada Pension Plan (CPP) is concerned.

In the early 1960s, the two largest provinces, Quebec and Ontario, had launched major pension-related studies. Ontario set up a provincial committee to study pensions and favored regulating private plans rather than creating a provincial earnings-related pension plan. In 1962, Quebec established its own legislative committee to study pensions. The committee paid close attention to the new Ontario regulatory pension legislation, but, in the end, ruled that the Ontario approach was not right for Quebec. Instead, it was decided that a provincial earnings-related pension plan would be the best solution. In addition to serving as a source of income security for elderly Quebecers, this new plan would serve as a tool of provincial economic development (Brooks and Tanguay 1985). Partly modeled on France's Caisse des depots et consignations, a new provincial investment board (i.e., the future Caisse de depot et placement du Quebec) would use pension contributions "to help finance the government's economic development projects" (Thomson 1984:185). Although this idea originated from provincial civil servants like economists Jacques Parizeau and Andre Marier, Quebec Premier Jean Lesage rapidly embraced it (Thomson 1984).

This idea of pension reform as an economic development tool was a typical product of the so-called "Quiet Revolution" launched in Quebec during the early 1960s, an era during which new ideas about nation-building and the role of the state triumphed through the influence of Lesage's Liberal Party and the new technocratic class it helped create within the province. In the 1950s, under the leadership of Premier Maurice Duplessis, Quebec nationalism had malnly defended the province against what nationalists perceived as federal intrusions into provincial jurisdictions (Beland and Lecours 2008). Moreover, beyond the issue of federalism, dominant nationalist ideas promoted the role of the Church and employers in providing social benefits and services. This was illustrated by Premier Duplessis and his Union Nationale party's support of a liberal vision according to which the state should play a modest role in the economy and in society at large (Bourque, Duchastel, and Beauchemin 1994). In Quebec, this vision of the role of the state collapsed after the death of Premier Duplessis in 1959. Grounded in new nationalist ideas about the positive role of the state in the economy, Lesage's Liberal government elected in July 1960 aimed at modernizing Quebec's economy while improving the socio-economic status of French-Canadians (Comeau 1989; Duchesneau 1981; Thomson 1984). Within this new ideological and political context, pension reform became an important nation-building tool for the provincial government, which now supported major welfare state expansion at the provincial level. Instead of trying to stop or slow down federal initiatives, the new Quebec Liberal government of Jean Lesage attempted to use the expansionary logic of social policy development to stimulate state-building in the province (Brooks and Tanguay 1985; Thomson 1984). From this angle, it is impossible to understand the prominent role of the Quebec government in the enactment of the CPP and the emergence of the QPP without paying close attention to changing nationalist ideas about the role of the state in that province. Such ideas crystallized within the provincial Liberal Party, which transformed pension-reform-for-economic-development into a major aspect of the Quiet Revolution it had recently launched (Beland and Lecours 2008; Thomson 1984).

Shortly after the Liberals tabled their proposal for the CPP, a series of federal-provincial conferences took place, which featured pension reform prominently (Simeon 1972). The first conference in July 1963 was mostly a fact-finding exercise for the provinces. At the November 1963 federal-provincial conference, the CPP proposal was discussed in detail. By that time, Quebec had begun to use its constitutional leverage on the debate over survivor benefits to bargain for a provincial opt-out clause. Overall, the provinces asked for three major changes to the federal proposal: (1) separating the OAS increase from the proposed CPP; (2) partially funding CPP with general revenues; and (3) increasing the combined payroll tax rate to 4 percent, which would accelerate the growth of the pension fund (The Globe and Mail, September 10, 1963). At the federal-provincial conference, Prime Minister Pearson stated that the provinces would be authorized to use half of the pension fund for provincial investment. It is important to note that a higher payroll tax would allow Quebec Premier Jean Lesage to channel more money into Quebec's economy through the provincial investment board he wanted to create (i.e., what would become the Caisse de depot et placement du Quebec). In such a context, Pearson's statement that fund investment was meant to generate provincial support for the federal proposal, especially that of Quebec (Simeon 1972).

In the spring of 1964, the federal government introduced Bill C-75. The Minister of Health and Welfare, Judy LaMarsh, outlined the plan to the House of Commons on March 17, 1964 (House of Commons [Hansard], March 17, 1964). From the White Paper proposal to Bill C-75, the CPP endured many changes. First, the replacement rate decreased from 30 to 20 percent. Second, the initial proposal established a pay-as-you-go financing scheme with no significant advance funding (Bryden 1974).

After the federal government introduced Bill C-75, provincial opting-out became an important issue, especially in Quebec and Ontario. It was also after the release of Bill C-75 that Premier Lesage revealed Quebec's pension proposal. This so-called QPP was quite different from the federally proposed CPP. For example, the payroll tax rate was at 4 percent, the replacement rate was higher [25 percent] than in Bill C-75, and the Quebec plan had a larger reserve fund. Moreover, the QPP covered a larger portion of the workforce than the CPP and had a higher income ceiling (CDN$6,000 instead of CDN$4,000 for CPP). Furthermore, the transition period was set at 20 years compared with 10 years under the federal plan, and, finally, benefit adjustments were based on a cost of living index rather than an earnings index as in Bill C-75 (Bryden 1974). Combined with Ontario's insistence that there be an opt-out clause in the federal legislation, the QPP proposal posed a major political threat to the future of the CPP (Simeon 1972). This is especially true because, on March 31, 1964, during a federal-provincial meeting held in Quebec City, Lesage convinced his provincial counterparts that his plan was better than the existing CPP proposal put forward by the federal government. Drawing on a carefully researched, 500-page report, his detailed presentation of the QPP stunned his audience. "His listeners were impressed, not only with the scheme itself, but with his mastery of the subject. There was silence when he had finished; then, Lesage recalled later, the prime minister asked: 'Jean, can we join your plan?' Whether he was serious or trying to relieve the tension with a humorous quip, he was acknowledging that Lesage had scored not only dramatically, but substantively" (Thomson 1984:188). Lesage had won the battle of ideas, which forced the federal government to rapidly come up with a revised plan.

The Federal CPP proposal was in such dire straits that in April 1964, Prime Minister Pearson allowed two delegates from the federal government to go to Quebec City secretly and work on aligning both the Ottawa and the Quebec plans. The intention was to prevent the provinces from rejecting the CPP and the only way to ensure the plan's future was to reach some kind of compromise between the CPP and the QPP (Simeon 1972). Through these secret meetings, Ottawa and Quebec were able to come to an agreement by the middle of April, and Quebec gave its consent for a constitutional amendment that would allow the CPP to include survivor benefits. On July 31, 1964, section 94(A) of the BNA Act was amended (House of Commons [Hansard], June 18, 1964:4467).

In November 1964, the CPP proposal, previously known as Bill C-75, was further amended (House of Common Debates [Hansard], November 9, 1964). Although not greatly different, Bill C-136 did contain some major changes, many of which reflected the above-mentioned impact of the proposed Quebec plan on the CPP. Six key changes were made: first, a larger CPP trust fund was created, from CDN$2.5 billion to CDN$4.5 billion by the end of the transition period, 100 percent of which would be available to the provinces for investment in provincial securities. Second, the payroll tax rate doubled, increasing from 1.8 to 3.6 percent. Third, the replacement rate also increased by 5 percent for a total of 25 percent of average adjusted earnings. Fourth, the qualifying age of the CPP was set to decline over a period of five years (from age 70 to 65 by 1970). Fifth, the plan would be compulsory for most workers and self-employed workers earning more than CDN$800 per year (Bryden 1974). Sixth, and most importantly, due to the constitutional amendment, survivor benefits could now be offered as part of the CPP. In the end, the provinces supported the compromises made by Ottawa as the Premiers felt the new federal plan was broader and gave them some institutional control over the future of the plan. Amidst business opposition (Special Joint Senate and House of Commons Committee on Bill C-136 1965), the CPP was given royal ascent on April 3, 1965; and the QPP was passed through the provincial legislature on June 23, 1965.

This section has suggested that paying close attention to ideas, in this case ideas about the role of the state in Quebec, complements the historical institutionalist emphasis on federalism that is central to the existing scholarship on social policy development in Canada. The new nationalist ideas that triumphed within the provincial civil service and Liberal Party in the early 1960s largely explain why Quebec pushed for the creation of the QPP in the first place. Without this systematic analysis of the role of ideas, a key aspect of the politics of earnings-related pensions in postwar Canada remains in the dark. But it is the nature of Canadian federalism that facilitated the state-level influence of policy ideas first formulated at the substate level, in the province of Quebec. From this perspective, institutional factors like federalism do play a major role in the politics of ideas.

CONCLUSION

The above account sheds new light on the two questions formulated in the introduction while providing insight into the theoretical issues. First, the analysis points to the key role of changing ideas about the role of the state in the debates and events leading to the enactment of the C/QPP. At first, the belief that private savings and occupational pensions should remain the most central source of security for the elderly represented a major obstacle to the enactment of a national earnings-related pension scheme in Canada. Yet, beginning in the mid-1950s, changing ideas about the role of the state and the adequacy of existing public and private benefits in a context of increased electoral competition helped legitimize the push for public earnings-related pensions in Canada. These remarks further support the claim that the ideas policymakers hold about the appropriate role of the state can durably impact social policy development. As for the role of electoral competition, it cannot be separated from the politics of ideas because, beginning in 1957, growing electoral competition and uncertainty created a favorable political context for the adoption of more ambitious social policy ideas by the federal Liberal Party. Debates within the party about the role of the state and the Liberal policy agenda, not electoral competition per Se, largely explain Pearson's decision to put the CPP forward.

Second, following historical institutionalism, the analysis stresses the impact of Canada's federal system on the debates leading to the enactment of the C/QPP. This is true because the logic of Canadian federalism allowed the provinces, especially Ontario and Quebec, to play a key role in the creation of a national earnings-related pension system. It is because of federalism that changing ideas about nation-building and the role of the state within Quebec's political and bureaucratic elite strongly impacted the development of that new system. Yet, without the transformation of substate nationalist ideas about the proper role of the state, it is unlikely that the QPP would have been proposed in the first place. Although the nature of Canadian federal and parliamentary structures enabled a province like Quebec to impact directly the enactment of the C/QPP, changing ideas about the role of the state in Quebec are crucial to understanding key aspects of this political story.

Overall, the above analysis suggests that, through their interaction with electoral competition and institutional factors like federalism, changing policy ideas can strongly impact social policy development. More specifically, there are economic and institutional conditions under which new ideas are more likely to directly impact major political decisions. In future research, sociologists and other social scientists should keep in mind that paying systematic attention to ideas as well as to the electoral and institutional conditions of their influence can strongly improve their understanding of policy change in advanced industrial societies.

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KRISTINA BABICH

University of Calgary

DANIEL BELAND

University of Saskatchewan

The authors would like to thank Angela Kempf, John Myles, Byron Spencer, and the three anonymous reviewers for their comments on previous drafts of this article.

Daniel Beland, School of Public Policy, University of Saskatchewan, 101 Diefenbaker Place, Saskatoon, SK, Canada S7N5B8. E-mail: [email protected].

(1) Although other scholars have stressed the prominent role of federalism in Canadian social policy development, this article is the first to show that paying systematic attention to ideas helps explain the emergence of C/QPP. For a discussion about the relationship between federalism and social policy reform in Canada, see Banting (1987, 2005); Boychuk (1998); Leman (1977); Maioni (1998); Orloff (1993); Pal (1988); Simeon (1972); Theret (1999).

(2.) Despite the fact that Ontario also played a major role in the enactment of C/QPP (Simeon 1972), this analysis focuses on Quebec because of the limited space available and out concentration on the role of changing ideas about the role of the state in that province.

(3.) Traditionally, the power resource approach, which describes labor mobilization as the locus of welfare state development in modern societies (e.g., Myles 1989; Quadagno 1988), has been described as an alternative to historical institutionalism. Yet, recent scholarship has successfully bridged these approaches (e.g., Hacker and Pierson 2002; Huber and Stephans 2001; Myles and Quadagno 2002).

(4.) For a critical discussion about this issue, see Boychuk and Banting (2008).

(5.) Canadian citizenship was not established before 1947, following the enactment of the Canadian Citizenship Act a year before.

(6.) At first, Quebec officials refused to implement the program because they believed it infringed on provincial jurisdiction while weakening the traditional role of the Catholic Church as the main provider of social benefits in the province. In 1936, however, the popularity of the program among the electorate convinced the provincial government to implement it (Banting 2005:99-100).

(7.) "The financing of the program, the '2-2-2 formula' was unique: revenues derived from an OAS tax comprising 2 percent on personal income, 2 percent on corporate income, and 2 percent from general budgetary revenue, all to be deposited in a special OAS fund" (Rice and Prince 2000:74). Because of the absence of earnings records, a flat pension like OAS is easier to administer than an earnings-related plan. This situation facilitated the implementation of OAS in the early 1950s. The authors thank John Myles for his insight about this issue.

(8.) According to the Consumer Price index of 1957, since 1949 prices had gone up by 22.6 percent, which is approximately 2.5 percent a year (House of Commons [Hansard], November 4, 1957).

(9.) The Progressive Conservative decision to increase public pensions required adjustments to the financing scheme for OAS and OAA (Old Age Assistance) in 1958. The 2-2-2 formula was changed to a 3-3-3 formula, and the contribution ceiling on income was increased to CDN$90 per year (Bryden 1974).

(10.) The Canadian labor movement had long been divided over the idea of earnings-related pensions. For example, the CCL (Canadian Congress of Labour) did not officially support this idea before 1953 (Bryden 1974; Myles 1988b).