The Munk Debates Podcast - Munk Dialogue with Andrew Coyne: are we in a recession - or a growth trap?

Episode Date: June 9, 2026

Recent economic data suggests Canada is in a technical recession. Andrew argues that while political parties continue to sell the fiction that governments can deliver short-term economic growth, economists largely agree that growth is driven by deeper, longer-term forces. The bigger problem is that neither party has a serious plan to boost productivity and investment. High taxes, burdensome regulation, and growing market concentration are holding the economy back. And while many Canadians blame immigration for our economic malaise, the real issue isn't too many workers—it's too little capital. Are we expecting too much from this government, or is it simply avoiding the hard reforms Canada needs most?Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

The government wants to be able to claim the credit for the good times, and the opposition wants to be able to blame the government in the bad times. So they're both kind of heavily invested in what every economist can tell you is a completely ridiculous claim. The dreaded R word has surfaced once again in the public debate. Are we in a recession or not? It's become a political issue in Canada, a bit of a ping pong ball, bounced back and forth between the conservatives and liberals and various think tanks and experts on the sidelines. To help break it all down, explain what it means, a pleasure to welcome back into the studio, Andrew Coyne, a regular contributor here at the Monk Debates. Andrew.

Good to be with you. So what's your take on this? And before we get into the semantics of technical versus non-technical, how would you characterize the state of the Canadian economy today? It's the same as it was two weeks ago, which is we have really slow growth. We've had really slow growth for many years. It's been getting slower and slower and slower really for about 50 years now, actually, If you go back, you know, we used to grow in the 50s and 60s at four or five percent

per year after inflation. Now we grow at maybe a third of that, if we're lucky and even slower in the last six months. So that's the context here is we have a long-term, you know, trend growth rate that's very low now. That's much more important to our well-being than whether the line squiggles 0.1 percent plus 0.1% or negative 0.1% in any given quarter. But it's a game we play every few years in this country. It's the same game whether the liberals are in government,

the conservatives are in opposition, or the conservatives are in government, the liberals are in opposition. And that is, you know, the minute you can get two quarters that are below the zero line, no matter how little, then you get to say the R word, gotcha. and both sides play it, and in fact both government and opposition play it, regardless of party, because it suits both of them to pretend that governments have a lot of influence over the short-term rate of growth of the economy.

The government wants to be able to claim the credit for the good times, and the opposition wants to be able to blame the government in the bad times. So they're both kind of heavily invested in what every economist can tell you is a completely ridiculous claim. governments cannot control the short-term squiggles of the economy. They can make things worse, I suppose, but they have very little ability to just gin up fast growth in any kind of short-term sense. What they do have some influence over is the long-term growth rate.

Again, mostly for ill. Mostly, if they could just avoid doing bad policies, we'd be growing a lot of quicker. But there's also some positive things governments can and should be doing to contribute to it. What we haven't seen a lot of is either of those things from, again, from governments of either the liberal or the conservative persuasion. This has been a bipartisan project of loading up the Canadian economy with growth killers,

high tax rates, high regulation, you know, monopolistic competition where you don't get the real competitive juices flowing to drive costs lower and productivity higher. And so that's a much more fruitful discussion, in my opinion, to be having than, you know, as I say, whether we're 0.1% of the good or 0.1% to the negative. It was, though, the third, again, barely negative quarter, but the third of four. Yes. So, as you say, there's a much longer trend. We can pull back and look at that. But in the short term, over the last 12 months, really since the last federal election,

this has been a weak economy. So let's leave the debate aside. I agree with you. It's somewhat semantic as to whether we're in a recession or not. it's the causes that matter. One of the big features of the last 12 months has been some changes in our immigration policy. And for really the preceding decade of the Trudeau government, is it not true, Andrew, that immigration in many ways was masking some of the weakness that we've seen, notably this year, as numbers have come down off these historic highs to something that's approximating,

more recent levels of migration into the country. Well, we now have negative population growth. The population is shrinking for the first time in our history. So they really did slam on the brakes. You know, it's both true and untrue. So I get what you're saying, that the real issue isn't the, at least for some purposes, the real issue isn't the overall growth rate. It's the growth in per capita incomes.

So you have to look at the per capita numbers, And you're right, that raw growth that is divided by a larger population is going to lead to unfortunate results on the per capita side. But overall growth also matters. It matters for things like the revenues that we have at hand to pay for collective things, to pay for defense, for example. So you can't just ignore the overall economic growth rate either. And where I part company with some people is that people will say, well, it was immigration artificially juicing. up growth. There wasn't anything artificial about it. Labor is a productive resource the same way capitalist. Those immigrants that were coming in were working and producing, and that's why they

were generating higher GDP. So, you know, yeah, let's focus on the real underlying problem, which is productivity, you know, output poor hour worked, is not growing very fast in this country and it's growing much slower than in other countries. That's a serious problem. I agree, and that needs to be fixed. But let's not pretend that. somehow immigration was somehow this sort of steroids or some sort of artificial stimulant that doesn't count. That's a productive resource. Sure, no, it's real growth.

But I think some people would argue, Andrew, that the high rates of immigration, even before the big post-COVID surge, were contributing to the lack of investment in capital machinery and operations, because cheap labor is cheap labor. really poor wage growth in Canada over the last decade. Surely that correlates in part to higher levels of immigration. The cohort of immigrants who've come in over the last decade are increasingly lower skilled, lower levels of educational attainment, fewer than qualifying under the so-called professional class. They've come in as temporary students, temporary workers, they've come in through provincial nomination programs. The composition of immigration has changed in the country. So what are

trying to get back to are the roots because you're right. It's about more than quarters. It's about stagnation in Canada and what's contributing to that. And I think you and I both agree that at the heart of that is a productivity crisis. So what I'm trying to understand is what's contributing to that productivity crisis. Immigration, I think, plays a role. Maybe you disagree. I think there's a case that it plays a role, not the totality of it. I think it's overstated. I get what you're saying that rather than investing in machinery equipment, you could just add labor. I think that has to be looked in the context of is the overall rate of growth of immigration, is it sustainable?

And I think you and I would agree that they'd let a couple of programs get out of control. And we could not, politically or otherwise, could not continue with that level of immigration within those programs. So they had to bring them under control. I think they've gone too far and slammed on the brakes. but at a given level of sustainable immigration, there's no reason to prefer, and certainly no reason to prefer in policy that business should invest in planting equipment in preference to labor any more than there's a reason we should prefer they invest in labor

rather than plant and equipment. But would you want labor costs higher to incentivize investments in efficiency, in productivity, in mechanization, roboticization. Only if it makes sense to the company to do so. There shouldn't be any preference in policy for one or the other. There's always going to be a question of what's the most efficient way to increase output. If you can do it more efficiently with labor, you should. That's part of keeping costs down and driving higher output as well.

But other things being equal, we want to remove the impediments to people investing in capital equipment. To me, that's the much more significant hindrance to investment. It's not the availability of labor. It's the costs and the difficulties we've imposed on people who want to invest in machinery and equipment. And again, this way predates any recent surge in immigration. This is a problem going back decades. We've had really anemic rates of investment, really anemic rates of growth, therefore. In fact, the capital stock per worker is actually shrinking in Canada.

Again, I think I'm pretty sure for the first time since maybe the Great Depression. So this is virtually unheard of. So when you've got more capital being taken out of commission because of depreciation, et cetera, than is actually being added, you've got a serious problem. So I just think it's a much broader question than just immigration. What about the number of people that are employed by government versus the private sector and the extent to which over the last decade we've grown the size of government, at least the federal government, by 40-odd percent.

We've seen significant growth in municipal and provincial governments. Is it partly, Andrew, that there's just simply more people working in less productive parts of the economy? I think that's certainly possible. How much of a contribution would be interesting to see? It's wasteful. You don't want to be hiring more people in the public sector that they actually need to. I'd be skeptical how much that's actually contributed to the productivity problem per se. Maybe a larger one is how much are resources going into residential housing, much higher than it was in the past.

And you can kind of see the rates of investment in housing going up and the rates of investment in machinery equipment going down. That's not great for productivity growth. And to the extent that that's been driven by artificial factors as well, that's a concern. But I think we've got to be looking at things like our tax rates, as predictable as that may sound. I think we've got to be looking at things like foreign investment, being more open to foreign investment. Which is related to tax rates. Well, that's right, and a bunch of things. But we have very low rates.

We have very low rates of domestic savings. And so if we're going to get the kind of very high rates of investment we're going to need to get that productivity up, we're going to have to supplement our own savings with foreigners' savings. That means being, as I say, being more open to foreign investment. It means getting to come to grips with public sector deficits, which are a drain on that pool of scarce savings. And particularly if we're running deficits, not for productive investment in the public sector,

but for basically current consumption programs, which we are to a great extent. So all these things are interconnected. I wanted to see another thing about this, people blaming immigration for something. I saw a story in the paper today about, this comes under the category of all economic news is bad. which is that the 10% of the housing houses in Toronto,

the mortgages are allegedly, I'm sure this is true, are underwater. They won't be able to refinance their mortgages within the next year. So, you know, it wasn't so long ago that we were decrying high and rising housing prices. Now the problem is, as it describes, that housing prices have actually been falling for the last four years in this country. They've fallen 33% in Toronto in that time. What also happened in that time? The great surge in immigration that supposedly was driving housing prices higher. In fact, in the period of maximum immigration, housing prices have been dropping like a rock. So people... Well, it's because borrowing yields have gone up. There's a lot of different reasons. I think it's largely because we're heavily leveraged one of the most indebted societies in the OECD. And when you crank up the short-term cost of capital, it affects asset prices.

Yeah, I don't disagree. But when, but people have been so quick to. say, oh, it's all immigration. Any problem we have is to do with immigration. You know, waiting lists for health care. Waiting lists for health care have been growing for the last 30 or 40 years. Immigration didn't do that. So people need to have a bit of a reality check on that. I fully agree that we let the programs get out of control. But that's a very different thing than saying immigration caused all our problems. I think there's a rate of absorption that Canadian society can sustain because we are supply constrained when it comes to scarce resources like education, health care, infrastructure, and other things.

But that's the key. It's calibrating our resources with our ability to successfully absorb, settle, educate, train, employ. Agreed. And you would say those numbers were in mismatch. We had just as high immigration in the 50s and 60s. When we were growing at 4% over GDP. So that's the issue.

Yeah. Okay. The problem isn't that immigration or population was growing at 2% as it's now shrinking. But the problem isn't that population was growing at 2% is that we can't get the economy to grow at 2%, which is really anemic rate of growth. So that's the problem. It's not that we have too many workers,

we have too little capital. So just to end this segment, I violently agree with you on a lot of these things being about immigration, you and I have a slightly different POV, but let's see that aside. I'm just looking at the last week of policy prescriptions out of Ottawa. We saw $3.1 billion in grocery checks

landing in bank accounts of households up to $75,000 a year in combined income. We saw a new fund, an AI fund, part of which hundreds of millions of dollars will be dedicated to companies that somehow government will understand this fast-changing technology and know exactly which small and medium-sized business to invest in. Quite striking. I wish them all the success. We then saw a supposedly landmark speech on anti-sebatism that, led to the announcement of a committee that doesn't have the word anti-Semitism in its title,

which will then study this phenomena and report back. I guess, Andrew, based on just the challenges that you and I talked about, the slow sclerotic growth, the extent to which we seem in some secular stagnation, I just wonder as we head towards the parliamentary break and we just look at the last few weeks of the Carney government's kind of collective policy and prescriptive output, it seems as if this crisis is going to waste. I have a feeling as if we're not matching the prescriptions and the solutions to either the urgency of the moment or, frankly, the spade work that needs to be done to dig us out of the hole that you and I've been talking about that was dug not by Mark Carney, but by, in many cases on these issues of productivity going

back decades with different governments. It's a mixed bag. So on the one hand, on, on on things like resource projects, they are certainly changing the regulatory environment in a big way. And a lot of people on the progressive side of the ledger are really upset about it. But they pull back on extending C5 more broadly this week. That's right.

So they pushed that off to the fall because they were getting a lot of heat on it. But broadly speaking, you would say they have been taking a much more pro-resource development. I mean, it's not maybe a standing with fame praise, but they've been taking much more pro-resource development, much more deregulatory approach. on that set of files. And to the extent that that will help move the needle on growth,

you know, I think that's broadly speaking to be welcome. You know, we want to see what the trade-offs are and the final policy. But I agree with you entirely on the broader agenda of growth, not just in particular resource projects or infrastructure projects, but getting the economy growing, it's been very disappointing so far. Now, you know, we'll give them, they'll have more kicks at the can, but that first budget, you remember all the the hype leading up to it about how it was going to be generational and et cetera. And it really wasn't. And you look at things like the sovereign growth fund, et cetera. Which will now invest

supposedly in the AI fund. Yeah. So it's a lot. It gets confusing. I take your point that a lot of that sounds a lot like the government that preceded it. Yes. So it's very, it's a theory of growth that's that's very top down, government directed. It's what you might call kind of hydraulic growth where you inject R&D and infrastructure funding at this end and you get a lot of growth at the other end. And to me that, you know, even if any of those programs made sense on their own, they're not going to add up to very much in a $3 trillion economy. What you need is every one of the 1.5 million businesses in this country. You want managers at every one of those businesses lying awake at night saying, what can I do to improve productivity tomorrow on the shop floor?

And I'm not being rhetorical on this. The things that really move the needle is when there's a systematic set of incentives that all these people have to chip away at in their own small piece of the puzzle, but it all adds up to a huge deal. When you get things like much lower tax rates that incentivize much higher rates of investment, maybe even more so when you get competitive pressures that force people to not just invest more, but invest wisely, make sure that that investment is used to the highest and best purpose. that's what really drives things on a sustained basis.

You sometimes get people talking about the productivity puzzle. They'll say, oh, we did all these right things. We brought the budget deficit down and we brought inflation down, and where's the big payoff? Well, there was a payoff, but it was kind of a one-time thing. Once you've got inflation down, you've got inflation down, and that will help. But if you really want the continuing year after year after year stimulants to growth, where does that come from? It comes from competition.

Why are those managers, why would they be? lying awake at night thinking, what can I do tomorrow? Because they're afraid that if they don't, the competition's going to eat their lunch. And in too many sectors of this economy, big, important sectors that are connected to a lot of other sectors, like telecoms and financial services and airlines. We've organized them as basically cozy little domestic oligopolis. And we just can't afford that nonsense anymore. We can't afford interprovincial trade barriers anymore.

So this has become, we've been talking in this segment about how this is going back 50 years. It's been a problem for many years. It was becoming a crisis in the recent years, not only because we were falling behind all these other countries, but because of the aging of the population and the fiscal implications of that. And the only way we're going to be able to pay for all those old people's health care is if we're able to generate the higher revenues. So there's all that. But then on top of that, now you've got Trump.

Yeah. And you've got all the headwinds and the uncertainty. And the cost. That is dragging down growth both in the short term and the long term. And the cost to D, to trump proof yourself. That's right. That's right. Massive public expenditure.

What we need to be able to do, I mean, some of it is national security and some will have public, et cetera, implications. But what we really need to be able to do is to say to people who are looking where to locate a plant, that you can locate that investment, locate that plant in Canada, and you will be able to, to be competitive and export into the United States and export elsewhere, even if Trump puts on tariffs. Yeah. And so that's a tall order. To overcome that, that means we've got to be hypercompetitive on taxes, hypercompetitive,

on the cost of doing business, et cetera, et cetera. And to come back to your original question, I do not see a lot of evidence at this point that the government is seized of that necessity and of that approach. So let's talk about that, because that is the kind of two or three trillion dollar question. when it comes to the economy. Why is that? Is it because Ottawa, and again, I go back to last week, the products that came off the shelf,

the checks into people's accounts for their groceries, again, middle-class households of $74,000 in combined income. It's remarkable. We did that with dental care benefits, up to $100,000. Just to put a word of caution on that. I don't have an objection to raising the amount at the bottom. I agree. Let's target people who are generally poor and needy. The difficulty when you're targeting, though, is if you're too zealous about it,

you'll have very high implicit rates of taxation as you withdraw the benefits as income rises. And this bedevils us with all kinds of programs. So that's why I'll put maybe a word in favor. I'd have to look at the exact numbers. But if you're trying to keep the withdrawal rates low, the arithmetic implication of that is people making $70,000 wind up getting some benefit. So I'd have to look at the exact. exact design of this, but it's just a word of cost. But the point is, is that under the Trudeau years,

and now seemingly continuing into the Carney era, a whole set of what might be called kind of hallmarks of the middle class, from dental care to child care, to pharmacare, to now a portion of your grocery bills, has become goods that the state is now furnishing on individuals, and individuals increasingly are coming to expect from the state. So again, I just speak to the continuity between the Trudeau years and aspects of the Carney years. Then you add the AI fund. Then you add the very good news that your media organization, the Global Mail, and my media organization of the Hub,

will now see subsidies extended beyond digital news outlets to all broadcasters. So there could be a massive profusion of the, again, the inveigling of the state even further into the media. And I guess my question to you is, is this not really about Mark Carney? Is it just more about Ottawa, that Ottawa has a source. certain way of thinking and doing things. And even when you potentially have a very creative and dynamic prime minister in the former Mark Carney, when he asks his officials and his departments for their best ideas, their brightest solutions, their persipacity of the economy and program

design, this is what you get. And in a sense, what we're seeing is something that is going to be quite hard to undo because it's how the system thinks, Andrew. And we're trapped in that system. I 100% agree. It's clientilism, is one word for it, that you create large constituencies and large interests with the vested interest in keeping the money flowing. And as you suggested, the most distressing part of it is now seeing that the media has become part of it.

And there's fault on both sides. There's fault on the government for offering it, and there's fault for businesses for taking it. And I say, sadly, to see the media business join. them. But it puts us in a very difficult position. How do we critique other industries for taking government bailouts if we've taken them? So I'm very distressed about it, as you know. And it's habituated businesses across the country to expect this. And every time now I see somebody's talking about we have to incentivize venture capital. The first thing I think about is, okay, so what are you looking for? And sure enough, you get into the paragraph nine of it, and it's,

we need more government hedge funds to be investing in, de-risking. De-risking, exactly. So, so. Everyone wants to be de-risk. You know, if you want a fun exercise sometime, in the public accounts every year, they publish a list of just the grants, government grants, over $100,000. Yes. Just the biggest ones. I don't know how many there are below that. And it goes on for something like 150, 200 pages of six-point type. Yeah. It's it, and you read through it and you come out of it going, there isn't a business trade association, tennis club, chess society in the country that isn't taking federal money

in some way. And then if you did, if you did it for the provinces. Yes. And I don't know how you get out of that because people become so habituated to it. Uh, uh, in the only way we seem to ever make progress against is when we have a massive fiscal crisis. And everybody goes, okay, now we have to cut back, and that lasts for as long as the fiscal crisis does. This is what happened with health care. You know, the last time we had really fruitful, interesting debates, and I mean serious debates, not either spend more money

on health care or privatize at all, but there were really constructive proposals for how to incorporate more market disciplines and competition within a publicly funded system. So we kept the best, keep the best of the current system, but try to have more incentives for a fiscalized. efficiency with it. The last time there was a really serious discussion about that at any kind of senior levels was in the late 90s early 2000s. Yeah. Why? Because the feds had turned off the taps somewhat to the provinces to the provinces and the provinces are having to get creative and then Paul Martin comes in and has the health care fix for a generation opens the spigots and everybody goes back to sleep. Yeah. So, you know, if there's a theme running through these remarks, it's people don't do tough things until they have to. People don't make, you know, investments and improve productivity in their own companies unless they have to. People don't change things that God knows at the government level unless they have to. And, you know, turning off the, if the government could make one, the federal government

could make one contribution to improving efficiency at the provincial level, it would be turn off the taps, you know, keep a modest equalization program, but get out of the game of funding provincial health care programs. You could transfer tax dollars. I understand the provinces have got long-term challenges there because of the agency. So transfer the tax dollars, but then the provinces have to be accountable

to their own taxpayers for how those dollars are spent rather than doing this game that every government of every party plays of pointing the finger at the feds point the finger at the provinces and the provinces point the finger at the feds. That's why I think, you know, balanced budgets are, it's simplistic, it's rhetorical, but it creates pressure inside a system.

And without pressure, there is no necessity, and without necessity, there is no invention. That's 100% right. That's the reason I think we should have balanced budgets. Absolutely. You're absolutely right. You don't go to hell in a handcart if you don't balance a budget in any given year. But if you keep doing that year after year, I completely agree. It's a simplistic rule, but sometimes simplistic rules are the best ones for imposing some

kind of budget constraint. And the ability to say no. Because otherwise you can always come up with reasons why we can push it off. We're going to do an AI fund. The debt you're a GDP ratio isn't rising as fast as it was. You know, you get all these crazy, looser and looser standards. And then you wake up one day and you've been hoping, you've been pricing in perfection that the economy will keep growing. And suddenly you're in a recession, or there's a war broken out, or what have you, or a pandemic. And suddenly your debt has ballooned and suddenly you You got the wolf at your door. Yeah.

We'll try one other argument out with you because you're helping me understand why we're not maybe seeing what you and I think could be a more, I don't know, what we call it, bottom up approach, something that kind of understands that there is the wisdom of crowds out there. And that if you give people the right incentives, you can, as you say, from the shop floor up, start to engineer, you know, broader and more sweeping change. And the argument would be something like this, that someone like this prime minister who, you know, has proven himself to be, you know, a capable administrator who's interested in power for the sake of program design and implementation and really sees himself as a kind of manager of the country and of the economy. If you ask of him the things that maybe you and I would agree with, things like competition reform, tax reform, regulatory. reform, to concede on those fronts or to act on them, let's say not even concede, just simply to act on them. I won't be pejorative, would be to take away two things which are essential to someone of his mindset. One is the fiscal capacity, because you would have to engage in a lot of tax expenditures probably to reform the tax system in a way that would make it hyper-competitive, let's say,

especially with the United States. So you're asking him to give up the fiscal capacity that allows him to create his sovereign wealth fund, his AI fund, his defense office, on and on and on, we can go. And second, if you ask of him regulatory and competition reform, Andrew, don't you similarly take away from the consummate Ottawa Mandarin, the consummate Ottawa bureaucrat, the wonderful thing that they've developed in this country, which is the ability through protection to co-op these large and powerful industries like banking, Telcos, Airlines, we can enumerate the list, where government gets to express its policy preferences through these industries on the basis that it has captured them. And those industries have entered, in some cases, the banking sector,

willingly into a kind of Faustian bargain with the government for those protections, in turn for, in many cases, acting on the government's particular policy preferences through their delivery of services to Canadians. Are we simply asking of this government of this prime minister too much in terms of his own mindset, in terms of how he thinks about government in terms of where he's come from, and you and I who might like to see regulation reform, taxation reform, competition reform, it's just not going to be part of the Kearney era. It just doesn't fit into his broader view of government and the tools that he thinks he needs to rework and reimagine this country in the image of his book values or whatever preconceived notions that he has.

I'll quibble a bit. I think there's some truth in what you're saying, but let me just try and chip away at that in a little bit. On the first point, I don't think you actually necessarily have to give up a lot of revenues to get tax rates down because there's a lot of opportunities to broaden the base. So there's a lot of tax expenditures built into the system now of needless, unjustified, inefficient, counterproductive. GST carve-outs for... Oh, yeah. Oh, exactly.

I mean, if you want to get into really politically difficult ones, but lots of ones that are pretty low-hanging fruit in terms of ill-judged, ill-directed, exemptions, preferences, deductions, that depart from tax neutrality, that therefore privilege certain types of investments in certain sectors through certain types of financing, et cetera, et cetera,

that every economist would say, we could get rid of those. That would be good on its own, that it would make a more neutral system. But then if you combined it with getting the tax rates down, you'd have a two for one. That sounds great. So all that could be done,

probably on something close to revenue neutrality, depending on how ambitious you wanted to get in terms of getting the rates down. On the second question, I think it's very interesting. I think there's some truth. I think there certainly would be a temptation. Let's remember that this is a prime minister who, as we're learning,

may be a technocrat and a former central bank governor and economist, et cetera, but he's also a very political animal. And he understands, and the people around him advising him would understand the roots and instruments of liberal power brokering. And as you suggest, some of that is playing nice with Canadian business, and that's a long history, and it's hard to break away from that. I think he does have some deregulatory instincts, as we're seeing on the resource file. I'm sure he understands a lot of these arguments as much or better than I do.

I think one of the things that may be holding him back, to some extent justified in some extent not, and that's the tricky judgment call, is that we're in something of a wartime economy, arguably, that we are facing a unparalleled security threat of a very weird kind. It's not that somebody's about to invade us, but it is certainly that we're going to be subject to foreign powers, including the United States of America, seeking to exploit our vulnerabilities and our weaknesses and use them as coercive tactics against us.

And we're seeing this on the trade file, but there's a whole range of other things where our interconnectedness can be used against us on the defense procurement file, for example. And I don't think that's an invalid concern. And it may be that on some fronts, given the strange realities we're having, we're going to have to put, and I'm usually the last person said this, but we're going to have to put the pure economics of a thing to one side. Industrial policy. So to some extent, I'd be very careful and I push back on any of these things. But on trade, for example, I would be against any kind of fortress North America.

America approach where we preserve free trade between Canada, the United States, by putting up barriers to the rest of the world. I hope we don't go very far down that road. But some part of that may be justified in the larger thing of trying to, you know, he's trying to square the circle. He's trying to make us less dependent on trade with the United States. But as anybody on the right would be the first to say, you can't just pretend that we don't have all this trade with the United States. So you're trying to, as I think we've said before, you're trying to build a new point. while you're flying the old plane, and to some point you want to be able to jump from the old plane to the new plane, but that's going to be difficult. So you have to be doing both of those things in the same time. All I'm saying is

we may get some curious-looking policies out of that that may in the sort of the environment that we're in with this crazy president of the United States may have some justification for it. But it doesn't mean that anything goes. So for example, it was very, disturbing and depressing to see the defense industrial strategy paper come out. And absolutely, if it had said, we need to shift away from buying, automatically buying stuff from the United States because we can't necessarily depend on them to be a reliable ally on this. That would be clear-eyed. But it didn't just do that.

It said, we're going to have a lot of more buy-Canadian policies. Again, on some things where in a crisis, it would be really hard to call in from other countries. get that. But the general tenor of this was not that, it was, this is a great opportunity to develop a Canadian defense sector and, you know, then at that point you just say opportunity costs. What's the cost in terms of diverting resources from other industries into the defense sector? And as I may have said to you before, if I could bring in one economic policy reform, it would be to have a minister of opportunity costs whose sole function at the cabinet table would be to raise the question of opportunity costs every time some other cabinet

minister raised some absurdly costly program and was ignoring that concept because it's just it's maybe the single most important concept in economics. Yeah. Final question as we wrap up today's show, the prime minister in recent polls seems to be cresting 50% support. That obviously can change and goes up and down. I'm sure all these grocery checks may see it pop up, even higher in the weeks to come, but I digress. The question is, when is he going to spend that political capital? And is it, is it, as you know, having looked at so many prime ministers, maybe Stephen Harper is an example of this. The power of the office is enticing. And many people go into that office with big ideas in the case of Stephen Harper, how to fundamentally change

government, in his view, around a set of conservative principles. He won his majority, and I think it's fair to say that he squandered it. What is the risk here that Mark Carney similarly? There's something about getting on your plane and flying to different countries and being in the room, so to speak, with the other heads of government and the perks and powers and privileges. come with this, as you writing your book, The Crisis of Canadian Democracy, an office that has now invested in it so much power, so much authority over the legislative branch of our government,

over obviously the entire administrative state. It's just, it's too great a temptation for mere mortals. Andrew, and we've seen political figure after political figure succumb to the office and lose sight of the bigger prize, the bigger agenda. Yeah. the legacy that they all claim to want to have, but many of them, frankly, never end up obtaining. Yeah, and I suspect it's not as venal as, oh, I like being in office and everyone kowtows to me.

I think it's, I suspect it's more, you habituate yourself to being realistic. Politics is the art of the possible, as they say. Well, that's a view of politics that is rather pinched. It seems to me successful politics is enlarging the possible. It's making things politically possible that weren't by taking chances, spending your political capital, et cetera. So you absolutely have to build up that capital. You can't just go in there and do all the difficult things without paying attention to how it's being received in the country and whether you're making any headway.

that way is an honorable suicide, but you're not actually achieving very much. So you can be so invested in the idea of husbanding your political capital, building it up, and persuade yourself, oh, I can't take too many chances with this because then I'll blow it and I won't be able to do all the good things I want to do. By the way, this is also an ethical peril is people do the worst things for the best reasons. persuade themselves, oh, it's so important that I stay in office. Because the other guy is so horrible. So I am entitled to take certain ethical shortcuts because I have such good intentions. And my opponent is such a reprobate and scandal. So there's all kinds of ways to lose perspective,

I think, in that job, never having occupied myself, but theorizing from outside and from watching a lot of Prime Minister. That I think these temptations that start with good intentions can lead you into either paralysis and stasis and not taking chances and not spending your political capital or worse things, on top of which you're in that little bubble with your closest advisors. And the centralization of power has really contributed to this where you don't have enough. I mean, part of the point of checks and balances is that they're reality checks. You've got to get the support of X, Y, and Z.

That's tiresome, but it also means you've got to plug into, how do they see things? What are they hearing from their constituents? Which can be useful addition. And the problem is, the longer in that job, it's so demanding, it's so driving day by day. Your every minute is programmed, and everybody's got to be on the team and willing to things. to succeed and being positive and it's very easy to just completely lose contact with with reality frankly and we've seen that with various prime ministers so as I said I if we if we just put it down to oh they like being in office they like the perks I

think I don't think it's as simple as that I suspect not and I'm not saying you were saying that but just just I think it really that the really dangerous thing is the people who are who have the best reasons to want to do the good thing and justify a lot of not great things in the service of that. Yeah. Well, said, Andrew. Well, you've been away from the Monk Dialogue Roundtable here for too long, so great to welcome you back.

And let's keep these conversations going. And we went a bit metaphysical today, but we had some things to catch up on, and you helped me work through some of my thinking, and I know you've definitely done that for our audience today. So on their behalf, thank you. Well, great fun. And it helps me to work through these things talking to you.

Yeah, no, we enjoy your contributions to the Monk Debates. So, ladies and gentlemen, if you are enjoying these podcasts, please check out all the free content in our feed, conversations with Andrew, my show with Janice Gross Stein, Friday Focus, a whole back catalog, 18 years of debates. You can access that on our website or scroll through the archive on your favorite podcast app. I'm Roger Griffiths, Chair of the Monk Debates. Until next time, bye-bye. The Monk debates are a project of the Aurea and Peter and Melanie Monk Charitable Foundations.

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