Prime Minister Justin Trudeau and former Finance Minister Chrystia Freeland in Ottawa on April 16.Justin Tang/The Canadian Press
On Nov. 3, 2022, finance minister Chrystia Freeland rose in the House of Commons to deliver that year’s fall economic statement.
She said that, in the post-COVID-19 era, the country needed “a government with a real, robust industrial policy; a government committed to investing in the net-zero transition, to bringing in new private investment, and to helping create good paying jobs from coast-to-coast-to-coast.”
She argued that “two great shifts” – Russia’s invasion of Ukraine and “the global green transition”– meant that the world was looking to Canada for “the most critical elements of their supply chains and for their energy security.” She called it “a generational opportunity to build a thriving and sustainable Canadian economy.”
To drive home the point that opportunity must not be wasted, she quoted Liberal prime minister Sir Wilfrid Laurier, who in 1903 put his own big industrial policy plan before Parliament:
“This is not a time for deliberation; this is time for action. We cannot wait, because time does not wait; we cannot wait because, in these times of wonderful development, time is doubly lost. We cannot wait, because at this moment there is a transformation going on in the conditions of our national life which it would be folly to ignore and a crime to overlook.”
When I read that in a media lockup two years ago, I was struck by three things. They speak to Ms. Freeland and the Trudeau government’s DNA, and are a reminder of how hard it is to distinguish one from the other.
The first takeaway is Ms. Freeland’s refreshing use of Canada’s history as a source of inspiration and not, as is the norm for the Trudeau government, fodder for an apology. However, after invoking Laurier to serve, she switched to her government’s usual approach to the past: condemnation. “That project, like Laurier himself, was imperfect. The prosperity and opportunity it brought were not shared equally – with Indigenous Peoples, with women, with new Canadians.
“But,” she closed, trying to somehow straddle inspiration and cancellation, “his message then is one that we should heed today.”
Second take-away: The grandiloquent rhetoric about supercharging a glorious future sat on top of what was mostly a list of small policies aimed at present political needs. These included “working to deliver lower credit card fees,” a temporary boost to the GST credit for low-income families, and sprinkles of public cash for middle-class homeowners and those hoping to join them, from a home-renovation tax credit to new tax breaks for first-time homebuyers.
Third take-away: The Laurier industrial policy that Ms. Freeland invoked, the National Transcontinental Railway Bill of 1903, was extremely ambitious. It was also a vast and expensive failure – not in woke terms, but in dollars and cents. Nobody involved in preparing Ms. Freeland’s speech, including the minister herself, had bothered to sweat that vital detail.
From the election of the Trudeau government in 2015 until her abrupt exit from cabinet last Monday, Chrystia Freeland was one of the most prominent members of Prime Minister Justin Trudeau’s team. In recent years, she was clearly the most prominent.
He made her deputy prime minister in 2019 (Mr. Trudeau had no deputy PM until then; neither did his predecessor, Stephen Harper), and though the title comes with no ministry or inherent authority, it was seen as marking her as second-to-the-boss. In 2020, she also became minister of finance – the minister setting other ministers’ budgets. She is the first woman to hold the job.
And then on Monday she shattered another glass ceiling, delivering a resignation letter timed and worded to rock the government to its foundations. She thereafter showed up at a Liberal caucus meeting, smiled, got a standing ovation, and then hugged the guy she aims to displace and perhaps replace, whom she had just accused of mortgaging Canada’s future with “costly political gimmicks.”
As a former senior member of the Trudeau government said to me this week, there’s a reason we’re still reading Shakespeare.
So what will be Ms. Freeland’s legacy as finance minister – the cabinet member in charge of fiscal and economic policy?
Her arguably most significant economic legacy predates her time at finance: serving as lead on saving the North American free-trade agreement from the first administration of U.S. president Donald Trump, and renegotiating it into the United States-Canada-Mexico Agreement.
Ms. Freeland gets much of the credit for the outcome, though reasonable people can debate whether success came because of her strategy, or in spite of it. She took a hard line and was in no hurry to make concessions. The Americans eventually ended up doing a new bilateral deal with Mexico, putting the pressure on Canada. The final outcome, after talks that went down to the wire in the fall of 2018, was the USMCA. Canada got something close to a preservation of the status quo, which is what it was after all along.
Ms. Freeland had two years earlier saved another, less critical trade pact, by similarly taking a hard line: In 2016, when a region of Belgium held up what would become the free-trade deal between Canada and the European Union, she walked from the negotiating table. The EU got its house in order, and the agreement went forward.
The country isn’t bankrupt. But the Trudeau government is completely spent
The irony, for someone who played such a large role in saving two free-trade deals, is that Ms. Freeland ended up in the Trudeau government in part owing to her 2012 book, Plutocrats. It’s an examination and criticism of the excesses of neoliberalism and globalization, or as the book’s subtitle puts it, “the Rise of the New Global Super-Rich and the Fall of Everyone Else.”
Ms. Freeland is not an economist, lawyer or banker, the usual paths to running the Department of Finance. She is, or was, a journalist. She went to Harvard, won a Rhodes Scholarship to Oxford, and lived and worked from her mid-teens to her mid-40s in increasingly senior positions outside of Canada, except for 1999 to 2001, when she was deputy editor of The Globe and Mail.
On paper, her prepolitics bio resembles that of Michael Ignatieff, yet she has never been tagged with his “just visiting” label. She has a talent for making people feel like she’s one of them and on their side, even as she stands out from the crowd. She also has a talent for figuring out who in the crowd are the right people to know, and showing the chutzpah to insist they get to know her.
As part of that, at the Toronto launch party for Plutocrats, she met Mr. Trudeau, then a leadership aspirant in the moribund Liberal Party. A year later, she entered Canadian politics. Two years after, the Liberals won a general election and she was sworn in as minister of international trade.
As a politician, it’s never been easy to know what she really thinks, or what she believes. It’s partly a congenital vice and virtue of the federal Liberals, who have traditionally been a centrist brokerage party, not an ideological movement. And the Trudeau government tends to operate via remote-control from unelected staff in the Prime Minister’s Office, such that it’s difficult to be certain to what degree cabinet members are in fact spokesministers.
Even before politics, however, Ms. Freeland was cautious. Her Plutocrats analysis and observations about inequality’s causes and consequences are telling. But the author was more reserved when it came to offering solutions.
Her letter of resignation, though a political bombshell, was at the same time careful and politic. Its blast radius was limited. She criticized “political gimmicks” but never said which government policies were gimmicks, and which were not. She had, until then, stood behind all of them and in front of many of them.
Her first budget, in the spring of 2021, included a $10-a-day national child-care program. It’s a signature initiative of the Trudeau government. As finance minister, Ms. Freeland can claim much credit for its existence – no funding, no program – but she also has to shoulder some of the blame for not enough spaces having been created, and provinces claiming funding is insufficient.
As finance minister, Ms. Freeland was also responsible for a series of initiatives to make housing more affordable by giving money to buyers – a strategy that mostly just further inflates an overpriced housing market, and directs even more investment into unproductive real estate.
She announced some of these programs in the fall of 2022, and more came later: longer mortgage amortizations; allowing more borrowing from a buyer’s RRSP; government loans for down payments (recently discontinued, thankfully); and the First Home Savings Account, an unprecedented tax shelter for future buyers.
Then there’s the 10-per-cent bonus on Old Age Security payment for seniors 75 years and older, part of Ms. Freeland’s 2022 budget. It’s billions of extra dollars in spending each year, in perpetuity, going to people who are, for the most part, in better financial shape than the taxpayers funding the program. And it’s hard to believe any future government will dare reverse course.
Critics have accused the Trudeau government, and Ms. Freeland, of spending wildly and running up unsustainable deficits. The truth is more complicated.
Spending has risen since 2015, in raw dollars and as a share of the economy. But extra spending has paid for things that voters want, from national child care to the poverty-reducing Canada Child Benefit, a 2015 election promise. Then again, a lot of the growth in government has been in staffing, suggesting that the public sector is becoming less productive and effective under the Liberals.
But the main fiscal guardrail – keeping the deficit low enough to maintain the debt-to-GDP ratio on a stable or downward path – has held. Though last year’s deficit clocked in at $61.9-billion, more than 50 per cent above budget, nominal economic growth was sufficient to keep the debt-to-GDP ratio from rising. If Ms. Freeland were in charge of the finances of Britain or the U.S., with their far larger deficits, she’d be seen as a relative avatar of fiscal probity.
The big story of the post-COVID-19 Canadian economy is persistently anemic growth. We’ve had multiple two years of contraction in GDP per capita. At the same time, key aspects of the cost of living were rising – notably housing, and especially rent – as an unprecedented boom in immigration outpaced the economy.
Which brings us back to the rhetoric of Ms. Freeland’s 2022 fall economic statement, where she argued for acting boldly, and spending boldly, to build the future.
As part of that, a lot of public money is going to lure manufacturers of electric vehicles and to subsidize an electric-vehicle supply chain. Last June, the Parliamentary Budget Office estimated a whopping $52.5-billion in public dollars had been offered to 13 EV projects: 60 per cent from the feds and 40 per cent from the provinces.
Will these investments deliver? Laurier’s big 1903 bet on his era’s sure-thing industrial strategy is a cautionary tale.
In 1885, the last spike was driven on the Canadian Pacific railway. But the federal government was soon convinced that if one coast-to-coast railroad was good, two would be better – and three would be best. Railroads were the future. Obviously.
The Canadian Northern Railway was slowly building a second transcontinental link, but Ottawa wanted more, and faster. In 1903, Ottawa agreed to subsidize the Grand Trunk Railroad to build a new route from Winnipeg to the West Coast, while taxpayers would build a new track from Winnipeg to Moncton, which upon completion would be operated by the Grand Trunk.
Those new lines were eventually all completed – just in time for all to go bankrupt. Ottawa nationalized Grand Trunk and Canadian Northern, which is how the federal government ended up owning a massive Crown corporation, Canadian National.
Much of the rail laid at government expense would be underused and eventually abandoned. The remnants of what Laurier-era taxpayers had paid for wasn’t returned to the private sector until nearly a century later, with the privatization of CN in 1995.
Investing for the future is good. Picking the right future, and the right investments, is hard.