Prime Minister Mark Carney arrives for a news conference about tariffs on Parliament Hill, in Ottawa, on April 3.Justin Tang/The Canadian Press
Jim Balsillie is a businessman and philanthropist. He is a founder and chair of several organizations whose mandates are to build capacity for a stronger Canada.
As economic strategies go, Liberal Leader Mark Carney is the ultimate confidence man. He wants to tax what Canada exports and subsidize what we import. Judging by the poll numbers, many Canadians are somehow persuaded this will lead us to prosperity.
As a candidate for the leadership of the Liberal Party, he pitched himself as an outsider and an unconventional politician who will focus on “getting our economy back on track” – an outsider who’d advised the Liberal government since 2020, during which time Canada’s per capita GDP has been shrinking 0.4 per cent a year, the worst performance amongst the top 50 developed economies, and eventually became the chair of Justin Trudeau’s 2024 Task Force on Economic Growth. And in true confidence man-style, he wrote a book about 21st century economic governance, Value(s), that is full of outdated, conventional economic theories rooted in the 1970s – an economy we no longer live in.
Whether it’s his perspectives on incentives, investment, climate strategies or productivity, Mr. Carney’s economic proposals to date represent the very establishment that has for the past 30 years peddled ossified and distorted ideas about the economy that manifested a systemic erosion of Canada’s prosperity. A more confident and efficient version of Mr. Trudeau will not make Canada’s economy grow. Instead, Mr. Carney’s economic policy proposals will simply perpetuate the status quo, making Canada more vulnerable, less prosperous and less sovereign.
One of Mr. Carney’s signature ideas for economic growth is pricing carbon. The Globe’s editorial board, and others, have pointed out that, even with his recent commitments to pause the consumer carbon tax, mandating big polluters to pay more means those costs will inevitably be passed down to consumers.
But there is a much costlier outcome for Canadians in the clean energy strategy that Mr. Carney is advocating for. Canada’s best export by far is energy, but because of decades of failed innovation strategies, our technology import levels far outweigh our exports, mirroring the structure of a developing economy. For a country in this predicament, taxing carbon to green the economy is a dichotomy. Mr. Carney says that Canada must also invest $2-trillion by 2050 – that’s approximately $80-billion per year – to achieve “net zero” without a plan for building the domestic clean-tech sector.
Canada can certainly go green but, absent domestic innovation, it will also impoverish itself, following in the footsteps of the Ontario Liberals’ Green Energy Act, which transferred billions of dollars to South Korea for green technology and then the Ontario Conservatives, who gave billions to foreign EV battery companies. That strategy of ignoring domestic innovation in favour of subsidizing foreign technologies has put Ontario on a trajectory where its prosperity is now on par with Alabama – one of America’s poorest states.
Driving a low-carbon transition requires a two-pronged approach: incentives to consume less carbon and, crucially for Canada and other large importers of technology, effective strategies to drive domestic innovation outcomes to rebalance our terms of trade.
But Mr. Carney doesn’t seem much interested in driving domestic innovation. In the 500-plus pages of his book on economics, intellectual property (IP) – the currency of the contemporary, technologically intensive global economy – is mentioned only once in a single sentence toward the end. Never mind that the global economy was reshaped 35 years ago because the United States started to focus on accumulation of IP assets for its companies and then encoding those new legal rights into trade agreements around the world, including via both NAFTA and the World Trade Organization in 1994.
Mr. Carney says he wants to “incentivize builders, innovators, and entrepreneurs to grow their businesses in Canada,” but just last month he announced a $6-billion dollar partnership with Australian and British companies to provide radar technologies for Canada’s Arctic even though an Ottawa-based, Canadian company, D-TA Systems, has been a world leader in producing over-the-horizon radar systems not just for the Department of National Defence, but also for the U.S. military. These radar technologies are now on the federal government’s list of “sensitive technologies,” which means the decision could not just undermine Canada’s economy but also our security.
Mr. Carney does not speak of data as an economic asset and critical input for artificial intelligence (AI) which is a new factor of production, nor crucially does he mention how Canada can regain some ownership of AI technologies. He has recently proposed that Canada host data centres without a word on Canadian ownership and control of the data and value-added applications. He is also quiet on the emerging economic age of machine-knowledge capital, a new form of production where AI replaces worker tasks.
Why does this matter? Because the decades-long transformation of the global economy has permeated entire industries, including traditional ones on which Canada’s prosperity currently relies, such as energy, manufacturing, agriculture and mining. IP and AI/data represent the substructure upon which companies across all sectors create higher margins and better paycheques.
Advanced technologies for fracking, deep-water-drilling, refining, upgrading, synthetic fuels, sensing software and more have changed both the economics and the dynamics of the energy industry. These developments are underpinned by substantial patent and AI/data portfolios owned and controlled by companies that capture the associated high value-added revenue. Halliburton, the world’s second largest energy company and one of the world’s top holders of AI patents, says that “the future of energy is digital.”
Because Canadian policy makers have proven incapable of designing 21st-century strategies for our strategic industries, our steel and aluminum sectors are confined to low-value outputs to the point they can’t even manufacture beer cans without both U.S.-based aluminum rolling mills and lid suppliers. “We fought for a long time to say: ‘Listen, we produce a lot of aluminum here, but we transform very little,’ ” said a welder and union leader for the Arvida smelter in Quebec. Instead, he said, those high-paying jobs went to U.S. companies. The transfer of those valuable jobs to the U.S. is at the heart of Canada’s prosperity erosion.
Canada’s industrial strategies never factor in the ownership or control of these assets. As a result, Canadian aluminum producers and energy companies don’t own significant IP and AI/data portfolios, shipping raw products that get refined and upgraded elsewhere. Before 1990, Canada’s oil sector both produced and refined around 1.7 million barrels a day. Now Canada produces around 4.9 million barrels a day, but still refines the same 1.7 million barrels a day, conceding the high-margin refining profits, high-paying jobs and control to the U.S.
Canada has consistently been a large net importer of IP, a position it shares with developing countries. This deficit would be significantly larger if the value of net flows of data were included. Ignoring the transformation of the global economy has cost and will continue to cost Canada hundreds of billions in missed revenues. Our country has for decades been faced with what economists call “poor terms of trade” – exporting low-margin goods and importing high-margin IP and data-intensive products and services. A weaker Canadian dollar further exacerbates this issue.
Canada doesn’t just need to diversify markets – it desperately needs to diversify our products. A political leader who isn’t aware of these shifts isn’t going to design and implement strategies that transform our industries from producers of low-value, raw materials into producers of higher-margin products and services.
When it comes to productivity, Mr. Carney caused a stir a few years ago when he said that the cause of Canada’s low business investment were companies “sitting on dead money.” Though labelled arrogant at the time, the statement was more revealing as evidence of Mr. Carney’s lack of understanding of how contemporary businesses make decisions to deploy capital. Because the nature and structure of the modern economy has changed, companies do not invest their money where they don’t have freedom-to-operate (FTO) since in global value chains, investments without the requisite ownership of IP and control of data cannot yield positive returns. FTO is a foundational concept in today’s economy, representing the ability of a business to carry out their expanded commercial plans or scale up.
But the relentless monopolization of knowledge and information over the past few decades has, in the words of economist Ugo Pagano, “restricted investment opportunities for many firms in different countries.” In this type of economy, FTO soars in its strategic relevance and explains why we are seeing a global race in IP and control of AI/data across all sectors and why smart countries are advancing their companies’ FTO in their industrial strategies and in trade agreements.
This contemporary framing of productivity makes no appearance in any of Mr. Carney’s writings or recent interviews about the economy. Instead, he leans into Ottawa’s favourite productivity trope – “we need to use a backhoe instead of shovels.” These arguments about “worker efficiency” apply to the production-based economy of decades ago, where the use of technology increased a worker’s output. But in a contemporary economy simply investing in new equipment and machinery in Canada is not a source of productivity gains because the same machinery, equipment and capital are also available to low-cost countries.
Today, productivity is increased not by the worker’s output, but in revenue per worker, and that comes from ideas that generate new, high-profit revenue. When companies buy new technology, productivity gains don’t go to the buyers of technology but to the owners of technology, such as the foreign radar firms that Mr. Carney committed $6-billion to. Canada does not need one more politician that’s going to bemoan “low business investment” by Canadian companies, while lecturing them to invest $10 so they can get only $1 in return.
Mr. Carney’s record as a central bank governor for two G7 countries is laudable. His commitment to public service is, too. But macroeconomic expertise is a narrow field that does not come with responsibility for managing national prosperity drivers or industrial strategy. Mr. Carney’s economic proposals to date resemble the excess confidence of our self-satisfied, outdated policy class who failed to see the global economic shifts happening all around them. Canadians should be wary of celebrity politicians that know how to present as connected and aspirational talkers. We had that in Justin Trudeau, Chrystia Freeland and their last economic adviser, Dominic Barton. It spelled disaster for our economy.
Canada’s economy is in structural decline because our traditional policy community is composed exclusively of people with expertise like Mr. Carney’s. Their economic strategies have repeatedly failed to shift Canada into a place where our highly educated work force, and our investments in R&D can generate higher value-added outcomes across all sectors and industries. They are unable to support Canadian companies that produce high-margin goods and services that drive better paycheques.
Any of the antiquated economic ideas currently proposed by Mr. Carney would be plenty troubling on their own. Together they augur a familiar and frightening era: imagine another few years where the economic erosion started by Justin Trudeau continues, only this time executed more confidently and efficiently.