People walk past the Peace Tower on Parliament Hill.Sean Kilpatrick/The Canadian Press
Eugene Lang is an assistant professor in the School of Policy Studies, Queen’s University. Brigid Waddingham is a public policy researcher at the School of Policy Studies, Queen’s University
“The global economy is more than a year into a profound rupture. Economic security, industrial policy, and geopolitical competition are increasingly shaping investment, trade, and financial decisions.”
So says Ottawa’s Spring Economic Update. In rhetoric and substance, the update doubles down on Prime Minister Mark Carney’s more market interventionist agenda, replete with a $25-billion “sovereign wealth fund” –the Canada Strong Fund – aimed at investing in “strategic Canadian projects and companies.”
A strategy for rupture may prove easier said than done.
Peter Drucker once said, “Culture eats strategy for breakfast.”
The Carney plan runs into three deeply embedded cultural barriers in the federal bureaucracy tasked with its implementation.
The first is risk aversion.
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Mr. Carney’s program requires government to move faster, and take calculated risks. The Prime Minister himself has said, “The risk is not to take risk.”
The existing federal machine prioritizes process over pace, deliberation over decisiveness and inertia over innovation. The 2006 Federal Accountability Act, designed to restore public trust in the aftermath of the sponsorship scandal, is partly to blame for this culture, leading to duplicative layers of oversight and a more process-heavy public service. A 2018 Senate committee investigating the Phoenix pay debacle – the costly, error-plagued software rollout intended to modernize federal payroll – pointed to a “pervasive culture” of risk aversion in the public service.
Individuals have little appetite for risk in a system where fears of social-media-fuelled scrutiny increasingly drive politicians to publicly blame officials for policy and administrative failures. The result is a public service proficient at identifying what could go wrong, but much less capable of advising what to do. It’s an orientation ill-suited to executing an ambitious plan in a volatile world.
The second cultural barrier is Ottawa’s tendency, built over generations, to see the United States as Canada’s only meaningful economic and security partner under any and all circumstances.
Mr. Carney wants to limit exposure to an increasingly hostile U.S. by diversifying trade and reducing defence dependence. But 35 years of focus on Canada-U.S. trade integration as the cornerstone of Canadian prosperity is deeply embedded in the public service and business leadership DNA. And outsourcing Canada’s national defence to the U.S. has been the standard operating procedure in Ottawa even longer.
The third barrier is a long-standing discomfort with industrial policy. Since the 1980s, Ottawa has largely accepted the standard “neoliberal” orthodoxy – focusing on “market framework policies,” notably tax, fiscal and monetary policy, trade and investment liberalization, and funding basic research.
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The Carney government is attempting something different, embracing industrial intervention and the risky business of picking winners. The Major Projects Office will prioritize select “nation-building” projects, while the spring update re-enforced the government’s commitment to a Defence Industrial Strategy, which calls for “buying Canadian whenever possible” and building Canadian champions.
The ambition is clear. But so is the friction.
Consider Energy and Natural Resources Minister Tim Hodgson, a Bay Street recruit assigned a priority portfolio in tension with all three cultural barriers.
Canada’s natural resource development is hindered by complex, duplicative processes that delay decisions and deter investment, a problem the Carney government hopes to tackle through “one project, one review.”
Mr. Hodgson sees it as a “strategic blunder” that 98 per cent of Canadian energy exports go to the United States. Mining is “foundational” to the government’s economic agenda, says Mr. Hodgson. Hence, a more interventionist approach: new partnerships through the Critical Minerals Production Alliance and presumably new investments through the Canada Strong Fund.
Mr. Hodgson, though, has been candid about the cultural barriers to the agenda.
“I think there’s a risk aversion in government that causes government to want to move slowly,” he observed. “You’re in a moment of rupture in the global trading order, and that level of risk aversion doesn’t serve us well.”
He acknowledges, however, that “it’s easy to just slag the civil service, but it’s important that we understand. It’s built to do something, and we’re asking it to do new things right now.” Therein lies the challenge.
The Carney government’s strategy seems directionally right for the moment, but it challenges 30 years of conventional economic wisdom in Ottawa.
Success may depend on whether Mr. Carney and his ministers can incentivize the public service to change culture and embrace a new model. As Mr. Carney said himself, “A stronger Canada depends on a strong and effective public service – the individuals who take plans and policies and transform them into tangible, impactful change.”