Economic statement needs to pick winners
It’s fitting that Finance Minister Bill Morneau will introduce his fall economic statement on the day after Halloween, as these are scary times. Canada’s economic growth is anemic and free trade capitalism is under attack in a way it hasn’t been in more than a generation.
While an economic statement isn’t a budget, it must be approached as an opportunity to be seized, not just an obligation to be satisfied. Canadian companies and investors need to be jolted from their stupor by a clarion call that boldly declares our country is open for business.
To that end, the statement must contain more than simply a litany of motivational platitudes — it must set out decisive actions to be taken.
One hopes those actions include the recommendations made last week by the noted experts on the Advisory Council on Economic Growth.
As the council made clear, being open for business means being open to greater levels of both immigration and foreign investment. While Canada is blessed with many assets, our demographic base and domestic economy will continue to contract without outside assistance.
Saying we are in need of foreign skills, foreign students, foreign investment and foreign trade is not an admission of inadequacy. In these uncertain times, perhaps our greatest competitive advantage is we haven’t been infected by a virulent strain of nativist protectionism.
There is a working consensus in Canada that we are not self-sufficient and, moreover, that our diversity is a source of enormous strength. When so many countries are deeply divided by these debates, we have the potential to become a beacon for attracting the best of the world.
Unfortunately, the complexity of our present economic circumstances means there are no “silver bullet” solutions to all the various challenges we are facing. Instead, the finance minister is forced to pull many different levers to get our economic engine restarted.
Aheightened focus on immigration, infrastructure and foreign investment would yield both short and longerterm benefits for companies in various sectors, but the minister must also consider other options, perhaps even some that have long been discarded.
As a conservative, I’ve spent the better part of my adult life arguing that the role of government shouldn’t include picking winners and losers. But times have changed. Canada’s best chance to revive our economy requires government to focus on our strengths.
Specialization has been the central pillar of globalization and free trade since the days of Adam Smith. When countries engage in free and fair trade with each other, there is no reason for each and every country to produce each and every type of good or service.
More importantly, specialization is inextricably linked to increased productivity. By focusing only on those sectors and industries that maximize a country’s resources — natural, financial and human — its overall productivity and competitiveness are enhanced.
Of course, specialization requires making choices — often difficult choices — to prioritize the pursuit of certain areas while ending the pursuit of others. Put another way, it means picking winners and losers — a task at which government has seldom, if ever, excelled.
In the past, governments of all political stripes have made economic decisions based, in part, on political considerations. In an effort not to offend any potential voters, governments have sought to avoid focusing on any one sector or industry to the detriment of others.
Not only have these types of strategies prohibited us from seizing opportunities and maximizing our national competitive advantages, they’ve failed to maintain the competitiveness of those industries and sectors for which we are ill-equipped to champion.
Minister Morneau should use his economic statement to break from tradition. He should announce a 4-I strategy, where government will prioritize key industries and then take steps to ensure that they have the immigration, investment and infrastructure they need to thrive.
More immigration, more foreign investment and more infrastructure will be wasted if they are not targeted towards priority industries.
It is time for Canada to divorce economic policy from electoral politics — it is time for the finance minister to choose a winning strategy.