There is no great mystery behind why some nations are wealthy and others are not. The policy mix varies very little and is well understood. Countries with lower, neutral tax systems, minimal regulations, the rule of law and openness to international trade and foreign investment are wealthier than countries with higher taxes, more complicated regulations, and which are closed off to the world. Economies are the sum of the countless decisions made by people on what to buy or sell, where to invest, or where to work.
There is no point in trying to control what is essentially life, so the best that can be done is to let it thrive.
In Canada the last 10 years, the Liberal party, particularly when led by Justin Trudeau, reasoned that its judgment was not just better, but far superior, than the market’s judgment, by which we mean the countless decisions made by people every minute of every day. The damage done to Canada’s economy has never been clearer.
An RBC report released Tuesday confirmed that new investment in Canada has completely collapsed during the Liberals’ tenure in power. “Between 2015 and 2024, more than $1 trillion of investment exited Canada — the largest capital exodus in Canadian history,” the report says. “For every dollar of inward FDI, two dollars exited.” Partly as a result, GDP per capita growth, the best indicator we have of standard of living, has been less than one per cent the last decade, by far the lowest of any period since the Great Depression.
The reason for this, the same reason why another $1 trillion in corporate capital is sitting idle, is what the RBC report terms “burdensome regulatory, permitting and project delivery barriers.” In other words, the Liberals introduced regulations on top of regulations and endless processes, in the name of fighting climate change, thus choking off investment.
The clearest examples are the introduction of the Impact Assessment Act, the government’s cancellation of the Northern Gateway pipeline, the carbon tax, the industrial carbon tax, the clean fuel regulations, and the constant atmosphere of uncertainty as Liberals kept promising new regulations, such as the emissions cap on the oilsands. If you want to achieve an environmental objective, the options are regulation or taxation. The Liberals opted for both, which was incoherent overkill, even from the perspective of centre-left environmentalism.
Some 10-20 years ago, Canada was teeming with proposals to build pipelines in every which direction, LNG terminals and oilsands mines. There was also tremendous investor enthusiasm in Ontario’s Ring of Fire mineral deposits. And then the Liberals came along and subjected everything to multiple reviews.
When for instance, the private owner of the Trans Mountain pipeline expansion pulled out, the Liberals did not take that as evidence that project reviews needed to be streamlined. They took it as evidence they needed to buy the pipeline, expending taxpayer dollars that would have never been spent if Canada had a functioning infrastructure assessment regime. By 2020, in all, about $150 billion in energy projects were cancelled or delayed.
Similarly, the Liberals were dismissive of the Ring of Fire because of the peat moss in the area. Former environment minister Jonathan Wilkinson complained in 2023: “I actually bemoan the fact that everybody goes right to Ring of Fire.” After the project was subjected to a regional assessment by Wilkinson, his successor Steven Guilbeault launched another review, further duplicating processes already completed by the Ontario government.
The RBC report makes some useful suggestions around corporate tax reform and streamlining foreign investment approvals. But it is clearly a document written to appeal to the central planner currently in the prime minister’s office, Mark Carney. RBC devotes much of its recommendations to how the government itself should invest, encourage private investment or otherwise leverage “state capital.”
It even includes lines like this, which could have been written by Carney himself: “State capital could be deployed at scale, not to replace private capital but to catalyze it.” The recommendations are thus best left ignored because they do not properly address the severe capital shortage that the report so astutely observed, and the reasons behind that shortage.
Canada needs new thinking, quick.
Canadians are poorer than they otherwise would have been had the Liberals permitted business proposals to advance normally. These were choices made by Trudeau and his cabinet, choices driven by the belief that they were smarter and more wise than all Canadians put together. It is a mistake that will hold this country back for years.
National Post