An Alternative Economic Strategy for Canada

Towards a Canadian Developmentalism

Photo by Tandem X Visuals on Unsplash

We’re in trouble.

No matter who you talk to in the Canadian political sphere, one thing that has been made abundantly clear is that the current economic status quo cannot and will not hold in an increasingly insecure and hotter world. Neither the Tories nor the Liberals seem capable of formulating a vision of Canadian development and progress that grapples with the enormous challenges of our times. It’s no surprise that we see headlines about secret RCMP reports talking about a potential political revolt once the reality of Canada’s job market and future economic situation sets in.

The unfortunate reality is that the past few years of Liberal rule have more or less been years of somewhat stable, but stagnant rule - and in an increasingly more insecure world, stasis is no longer good enough for a nation that faces multiple challenges, whether it be Russia’s claims to the Arctic region or military expansionism, America’s democratic instability, or growing Chinese economic and cultural power. On a domestic level, young Canadians are increasingly disenchanted with the fact that many of them will not be able to afford their own home and many are also worried that the cost of living crisis makes it close to impossible to have any sense of hope for the future.

The Canada of the future must not only be capable of providing for all of its citizens - it must also be able to stand by itself in the face of a growing illiberal world, both domestically and abroad. It needs to have a strong economic base upon which the wealth that is created can be shared widely - both growing and sharing the economic pie will need to be a two-pronged agenda for any policy of the future.

Rather than go all in on right-wing populist solutions that are almost assuredly going to grow in popularity in the coming years (likely to be some form of austerity program, climate denialism, or placing a moratorium on immigration of the foreseeable future, or all of the above), we need to break down how we break past the current economic status quo to get to a Canada that works for all of its citizens.

1. Housing

The first plank of a Canadian economic strategy for the future has to entail the massive build-up of Canada’s housing stock - whether by private or public (Crown) means. For too long, the asset-driven economy of real estate has dominated the real human needs of young Canadians. NIMBYs have managed to price out young Canadians from the possibility of ever owning a home.

The government needs to incentivize upzoning, create provincial or federal-level systems for public home development, and wherever possible, implement a land value tax. All of these would be steps towards shifting the Canadian political economy away from focusing on the asset-driven economy that prioritizes asset-based accumulation over human needs. Other steps to help renters afford their residence should also be considered.

2. Industrial Policy and Planning

The next plank needs to be a national planning system and a Canadian industrial policy. Many of Canada’s current issues come down to the inability to plan seriously, whether it comes to national security, immigration, or economics. A new attempt at an integrated industrial policy - one that takes each of the various security, social, and economic challenges that Canada faces seriously, and one that sets goals that the government should orient its policy around accomplishing. In the age of the Net Zero transition, industrial policy needs to focus on accomplishing the transition away from CO2-heavy industries to ones that are not and for everyday Canadians to benefit from the transition. Reaching Net Zero requires a strong but steady hand, and we need an industrial policy that helps both citizens and corporations understand when and how Canada will be changing and what is going to be needed. The industrial policy should also take into account the need for a domestic Canadian national defence sector and spending and plan for the various utilities and residents required for new Canadian residents and citizens ahead of time.

3. Economic Reform

While the phrase “economic reform” sounds Thatcher-esque, it is quite evident that Canada’s current economic arrangement is essentially neither public nor private enough, leaving us with the worst of both worlds.

One such reform would be to focus on removing internal Canadian trade barriers. With internal trade barriers leaving both the provincial and federal governments with less revenue, a cross-Canada move to try and genuinely remove as many trade barriers and harmonize regulation as much regulation as possible is a common sense reform that leads to every actor involved becoming wealthier.

This needs to be combined with increased anti-trust enforcement and measures to allow more competition within Canadian markets. It’s a running joke that Canada’s economy is 5 megacorporations in a trenchcoat, but some jokes turn out to be more accurate than others. While the phenomenon of “greedflation” may be more rhetorical than actual, one thing that is not in doubt is the fact that the Canadian grocery industry and the Canadian telecom industry manage to enhance their market power against consumers since they face little to no economic challengers. It’s time for this to change. We can no longer allow corporate power to continue rent-seeking and make the cost of living crisis for regular Canadians worse; it’s time for them to face real competition and for consumers to benefit.

4. Public Investment/Research and Development

In the era of the American Inflation Reduction Act, it is quite evident that the era of hands-off economic policy is over. Canada must ensure that it does not get left behind economically. To do so, we should boost investing in research and development (which we currently spend 1.6% of our GDP on, as opposed to the OECD average of 2.7%.) and provide a more favourable regulatory environment to those considering starting a company. The boost in public R&D spending should also come with regulatory reforms that allow Canada to have “permissionless innovation”. Some might find this combination of state investment and somewhat libertarian economic policy odd, but in practice, as Bill Janeway points out in his book “Doing Capitalism in the Innovation Economy”, the state has the time horizon required for a long-term investment that the market then finds opportunities for growth in.

With these 4 planks as a baseline for any successful Canadian economic strategy for the future, it remains to be seen which party will have the courage to adopt them in total. The Conservative Party seems more likely to adopt a plan of austerity in their (very likely) next government, likely boosting short-term gains over long-term investment. The Liberals are trapped in stasis, and the NDP remains (unfortunately) politically irrelevant on the national scene. Each of these parties has yet to sketch out its way to a Canada that can grow effectively without retreating into its stale ideological dogma. That being said, if a leader and movement with enough political and economic vision can come along, the hope and dream of a Canada that is on the frontier remains possible. One only hopes that said leader and movement come sooner rather than later.