In June, Prime Minister Mark Carney said that 'the transformation of our military capabilities can help transform our economy.'Spencer Colby/The Canadian Press
Eugene Lang is the acting director of the School of Policy Studies at Queen’s University, a senior fellow at the Bill Graham Centre for Contemporary International History at the University of Toronto and a fellow at the Canadian Global Affairs Institute.
Prime Minister Mark Carney, speaking in June at the University of Toronto, had big plans for how Canada’s military could help boost the economy.
“To build the military we need, we can deploy and develop Canadian innovation, ingenuity and industry,” he said in prepared remarks. “The transformation of our military capabilities can help transform our economy.”
Mr. Carney’s position was that his government’s increase in defence funding – a $9.3-billion annual boost beginning this year – can and should have a big impact on the Canadian economy. It’s not a moment too soon, given Canada’s relatively high unemployment, anemic productivity growth and recession risk.
Mr. Carney’s point is therefore non-controversial to most people. It’s common sense. A no-brainer.
Yet this is radical thinking in Ottawa. Meeting the Prime Minister’s objective is going to be a Herculean task for the federal government that will run into a mountain of active and passive resistance.
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Most of our NATO allies have been guided by Mr. Carney’s basic philosophy for generations. Since the 1960s, they have married defence expenditure to the performance of their economies in sophisticated ways. The Americans have taken the defence-economy objective to a high art form, notably through the Defense Advanced Research Projects Agency, which funded game-changing technologies including the computer mouse, GPS and the internet. Ottawa has talked for years about creating a Canadian version of DARPA, but has never been able to pull the trigger.
This is chiefly because the federal government has never operated with the objective of leveraging defence funding to drive innovation and economic growth. It has neither the policies, the programs, the mindset, the skill set nor, most importantly, the culture to pull off Mr. Carney’s agenda, especially in the short run.
In the early 2000s, I worked for ministers of National Defence, John McCallum and Bill Graham. Then as now, the Defence Department was indifferent at best, hostile at worst, to any suggestion their money should be spent on secondary objectives such as economic performance. There was no recognition that to maintain public support for defence spending – the largest discretionary expenditure in any government – it must have some economic return. There was also no connection drawn between national security and economic health.
I came to National Defence headquarters from the Department of Finance, a few blocks away on the other side of the Rideau Canal. It might as well have been on the other side of the moon.
Over at Finance Canada, national defence was seen as a constant fiscal pressure to be contained, partly because of the lack of interest within the Defence Department to the economic dimension of defence spending. It seemed lost on people at National Defence headquarters that the Department of Finance provides the funds the military needs to exist, while a core mandate of Finance Canada is this country’s economic growth, mainly because that has a direct impact on revenue, which is needed to fund government activities – including national defence.
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Little has changed in the intervening quarter century. In fact, the indifference if not resistance within defence circles to using defence expenditure partly in the service of Canada’s economic performance has probably deepened over the years.
The irony is the federal government constantly looks to European and American allies for inspiration, policies and so-called best practices. But not in this area. Canada has been an island in a sea of countries that regard defence spending and economic performance as two sides of the same coin.
Canada has an industrial offset policy, requiring firms that win large military equipment contracts to invest in Canada. We also have a national shipbuilding strategy, which requires naval and coast guard vessels to be built in Canadian shipyards. But our North Atlantic Treaty Organization allies regard offsets as the most passive and unsophisticated tool in the government’s tool kit. And the fact that we even have a shipbuilding policy is arguably the exception that proves the rule, an initiative that was originally resisted by the Department of Defence.
Some people saw signs a page was turning in the dying months of the Trudeau government when work began on a “defence industrial strategy.” But as the saying goes, “culture eats strategy for breakfast” and Ottawa simply lacks the requisite culture.
Mr. Carney’s mindset and impulse are correct. This is one of those few cases where sound economics meet common sense. Unfortunately, the Prime Minister doesn’t have the government underneath him to deliver what he wants.