An overwhelming force versus an immovable object
Finance Minister François-Philippe Champagne, pictured with Prime Minister Mark Carney presenting the Spring Economic Update on April 28. / TWITTER PHOTO
A week or so ago, Prime Minister Mark Carney posted a YouTube video titled "Forward Guidance," in which he committed to periodic updates on the progress of his government's actions to address Canada's many and varied challenges.
It was much remarked upon both positively and negatively, frequently and predictably along partisan lines. That a commitment by a Prime Minister to regularly tell Canadians what his government is doing on their behalf should attract so much attention is itself a mark of how parched the Canadian media landscape is for clear, concise messages from any Prime Minister.
On the other hand, it speaks to the complexity of the Prime Minister's agenda that he will need videos like this to express its multiple strands through bite-sized, graphics-friendly messages. This affords him a platform to remind voters of the historic urgency that made his agenda necessary, as well as the progress of initiatives he has set in train to meet them.
What stuck out most to me about Forward Guidance was the language Carney used to express, in a sense, a general theory of his government's economic policy. Noting his experience as first Governor of the Bank of Canada and then the Bank of England, he said he developed a policy of forward guidance “to assure people that, however difficult the situation seemed on any given day, we were acting, and importantly, that we would continue to act with overwhelming force against our problems until they were solved.”
A subdued Spring Economic Update
“Overwhelming force” is not a phrase commonly used to describe any kind of Canadian economic policy, certainly not since the Second World War. Indeed, a general Canadian political reflex toward incrementalism in all areas of public policy has been the rule, with rare exception.
Carney is that rare technocrat unafraid to communicate in bold strokes. So his resort to the concept of overwhelming force is just more of the same. He has matched his actions to his rhetoric.
He has marshalled every tool the federal government has at its disposal to transform the Canadian economy. Along the way, he has targeted specific actions directly at affordability, from suspension of the federal gas taxes, to cutting the GST on certain new home building, to scrapping the consumer carbon tax to the new Canada Groceries & Essentials Benefit.
But it is safe to say that this week’s Spring Economic Update (SEU), with its new spending to bolster skilled trades in all sectors and a slightly smaller deficit than projected, seemed somewhat underwhelming.
Moreover, the SEU was communicated in a muddled way. The new Canada Strong Sovereign Wealth Fund, the one real headline grabber, was announced the day before the SEU was released, leaving same-day coverage focused on the spending on skills development, amateur sports, and widely welcomed changes to the application process for the Disability Tax Credit.
The decision expressed in the SEU to rehash affordability measures already in train and the absence of any new ones, apart from the CPP premium cut, was received as particularly tone-deaf politically, reminiscent of the Trudeau Liberals' approach throughout the post-COVID inflation surge.
So, was the SEU worthy as the first major public event of a new majority in Parliament? How to explain the seeming incrementalism in the SEU?
It may well reflect a government taking a bit of a breath after what has, by any standard, been a busy and productive first year. In the lead-up to the SEU, the government also widely trailed the idea that going forward, the SEU will be primarily just that — an update on the state of the economy, not a platform for ground breaking shifts in policy.
Not your parents’ competition policy
But as scaled down as the SEU may have been, there is no doubt that it delivered bracing, and perhaps concerning, forward guidance to the private sector in respect of a potential onrush of new and unfamiliar competition. This is particularly so for consumer-facing sectors — such as telecommunications and banking — where competition is currently limited and whose pricing practices, rightly or wrongly, become immovable objects of public irritation and complaint.
Among the many causes of Canada’s lagging labor productivity is the reality that domestic companies often face less intense competition at home and, in turn, feel less pressure to invest in productivity-boosting technology.
That is why the SEU chapter on competition caught my eye. It lays out a “Whole-of-Government Competition Plan” which aims to “ensure that competition is prioritized throughout the federal government's policies.” Its “focus will be on removing inefficient government policies that impede competition arising from regulation, procurement, and industrial support.” This last phrase speaks volumes as to the disruptive potential of the plan
Telecommunications and the banks are explicitly highlighted for attention in the SEU. But grocers would be wrong to presume that they are not also in the Prime Minister’s cross hairs.
At the level of pure politics, this suggests that the federal government is tired of carrying the can for consumer anger over high prices and seems intent on forcing the currently dominant market players to do more by facing more competition.
Opening these sectors to real competition could, in theory, be genuinely transformative. It could entail more muscular enforcement of competition laws, blocking mergers that concentrate market share, admitting foreign competitors, and reducing barriers to domestic start-ups. The resultant increase in competition could spur domestic investment in innovation and productivity and, in turn, lower prices.
With these possibilities come parallel political risks for the government, especially on its progressive left flank, where low prices are popular but layoffs likely to result from increased competition, particularly foreign competition, are definitely not. And any weakening of existing supply management regimes for dairy, poultry, and eggs is a political dead letter.
It should also be noted that a fully implemented “Whole-of-Government Competition Plan” would ripple disruptions through Canadian sectors well beyond those highlighted in the SEU.
As articulated in Forward Guidance, Mark Carney's preferred method of government is based on the application of overwhelming force until problems are solved.
So the banking and telecommunications advocates, and no doubt others, should be busy this summer making the cases to justify their current competitive practices, habits and prices, and for those currently locked out of markets to take advantage of what could be a generational shift in Canada competition policies.
It could be a classic contest between an overwhelming force and an immovable object.
