They decide which stores will have to shut down, who can stay open and under what conditions, who gets wage support, who gets loans, who gets bailed out, who is left to survive on their own.
The hands of governments are everywhere in the economy during the pandemic. And it’s becoming obvious that they’re not going away — even when we start to recover.
With vaccines slowly being distributed across the country and the prospects of freedom inching closer, federal planning for the recovery has started in earnest, with an important budget on the horizon and widespread consultations in the works.
While federal involvement in the economy will look a lot different in the recovery stage than it does in the midst of the brutal second wave, it will be omnipresent all the same.
And for the most part, that seems to be just fine with many business leaders. In fact, they’re inviting it.
“It is time for government, with an industrial policy, to support the overall direction” of the Canadian private sector, says Monique Leroux, the former CEO of Desjardins Group and now chair of the Industry Strategy Council, a group of top business leaders asked by the federal government to advise it on how to handle the economic side of the pandemic.
The council has been talking throughout the pandemic to businesses large and small in all corners of the country, advising senior government officials and cabinet ministers in real time how to tweak business supports, how to help labour, and how to safely restart the economy even as the coronavirus rages.
Now, it has set out a longer-term strategy to pull Canada out of its funk and make sure the path to recovery shakes us out of the complacency of the past.
But unlike the inclination from the private sector of previous eras to shove government out of the way and let unfettered capitalism thrive, they want to see government as a full-fledged partner, putting money, policy and research into propelling key sectors in the hopes that we can take on the rest of the world.
“The concept is to bring a strong portfolio of public investments and private investment in a kind of renewed partnership between government, Canadian companies and pension funds and financial institutions in Canada to fully position our leadership in the world, (in areas) where we think Canada as a middle-sized country could make a difference,” Leroux said in an interview. “That’s the rationale.”
This doesn’t come out of the blue.
The United States and the United Kingdom are doing it, Germany and Israel are doing it, China and South Korea too. The protectionist tendencies of U.S. President Donald Trump prompted a doubling down on government involvement in economic direction in countries around the world. And then came the pandemic, showing countries in no uncertain terms that governments needed to be activist and even aggressive to ensure they have adequate medical supplies and vaccines.
But Leroux’s network told her that Ottawa’s involvement can’t just end with vaccines. Instead, it needs to become more strategic — and government insiders across the board have heard the appeal.
At first, the government’s involvement will come in the form of stimulus — up to $100 billion that Finance Minister Chrystia Freeland has already set aside to repair the damage caused by the pandemic and get people back to work. Training, infrastructure and other time-limited spending will form the bulk of the stimulus package — standard fare in the wake of recessions.
But the government has signalled on many fronts that it won’t stop there.
Freeland has indicated she will actively push Canada’s digital prowess. And the government’s new climate strategy, to cut emissions significantly by 2030, is as much an industrial strategy as it is an environmental policy, with its many incentives to push the country’s energy use away from fossil fuels and into clean technology and renewables.
Leroux’s council also wants to see federal support for leveraging data and intellectual property, ramping up the agri-food sector and promoting advanced manufacturing. We’ve heard similar recommendations from the likes of the Business Council of Canada and the economic advisory council to former finance minister Bill Morneau, led by Dominic Barton, now-ambassador to China.
There’s every indication that the government is all ears.
Loading…
Loading…Loading…Loading…Loading…Loading…
But what if the government chooses wrong? Fans of a modern industrial strategy say they’re not advocating for government to pick winners. Rather, they say Ottawa spends billions every year on all sorts of incentives and subsidies for businesses. Instead of spending willy-nilly, they should have a strategy that pushes companies to be more competitive in the areas we are already good at.
It’s high risk. If governments, the financial sector and companies alike make the wrong bet, we will have wasted many billions of public and private money on mediocrity rather than excellence. But if they bet right, we’ll have jobs and profits for the next generation.
It looks like it’s a bet they’re all increasingly willing to take.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
