The Munk Debates Podcast - Munk Dialogue with Andrew Coyne: Mark Carney's new sovereign wealth fund is a solution in search of a problem down

Episode Date: April 28, 2026

Mark Carney has proposed a “Canada Strong Fund” which will launch with a C$25 billion endowment focused on domestic infrastructure, part of a broader effort to reduce Canada's reliance on the United States after tariffs have strained the economy. Canadians would also be able to invest their own savings in the fund. But with productivity declining for decades, it's unclear how this initiative meaningfully addresses the country's deeper growth challenges. At a moment of real urgency, the question remains whether this represents a serious step toward fixing Canada's underlying economic problems.  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.

Long and short is I'd like to see more of the fine print on this. Maybe it's more defensible than it looks on the surface, but it just looks like something that it's a solution in search of a problem, I guess. Welcome to the Monk Dialogues with journalist Andrew Coyne. Andrew, great to have you back in the studio for this week's conversation. Let's start in Canada and then go overseas to the Straits of Permoos to talk about the latest developments. But first, a kind of preemption today of the spring. economic statement that the Prime Minister coming out and announcing the stand-up for the first time,

I guess, in Canada, of something that he's calling a sovereign wealth fund. What do you make of this? And what do you think he's trying to do? Well, first of all, we'll need to see more details. It's an odd thing to call it a sovereign wealth fund, since those are usually based on wealth. They're usually based on you have this wealth coming from, let's say, from oil, as in Norway's case, with enormous amounts of revenues coming in the short term, but it's a depleting asset. And the idea is let's convert that into a permanent asset that will yield dividends well into the future.

That's fine as far as it goes. The idea of converting things into permanent assets that are depleting resources makes sense. I've never been sold in the idea that that means you therefore have to do it through one big state-run fund. In Alberta, for example, this will be a controversial example perhaps, but when Alberta uses oil revenues to keep tax rates low and therefore generates higher rates of investment than it otherwise do it, that's private sector investment that's being catalyzed by those oil revenues into permanent investments that yield permanent revenue yields. So that's just as a valid and exercise, maybe more so in my view, because it's less prone to being manipulated and misspent politically, which Alberta also has experienced through. through the Alberta Heritage Savings Trust Fund. So if you want to look at the examples of that fund

versus what private investors have been able to do with Alberta's very low tax rates, relatively low tax rates, I think the, I would say, the evidence suggests the private route is better. So there's a germ of a truth of an idea in the sovereign wealth fund idea. It doesn't necessarily have to be done through public sector investments. But then this thing is something completely different.

It's not being funded through surpluses or through oil revenues per se, it's just a government fund that's being set up, basically with borrowed money, like all the other government investment funds. The notion this is the first time we've had a government investment fund is preposterous. This government alone has set up several.

And then it's going to invest in, I presume, infrastructure projects, major projects, much like the Canada Infrastructure Bank was supposed to, and it runs into the same issue, which is, is it, well, The Canada Infrastructure Bank was supposed to be mostly raising private funds. It was going to have some top-up of public funds, which didn't need to be there. The idea of let's have some cooperation where you have private capital raising the funds,

but the government kind of de-risks it politically, i.e., we will give you assurance this project will actually go ahead. To whatever extent governments can. That's fine, and the idea behind that was, let's fund these projects through a dedicated user, fee that provides a stream of revenues that people can then invest in in anticipation of receiving those revenues. Well, there's all kinds of reasons why that's a good idea. One, you get a test of consumer demand. Does anybody actually want and want to use and is willing to pay for these services or is it just roads to nowhere, et cetera? Secondly, you're taking things off of the taxpayer base that don't need to be there. And if you have scarce tax dollars, you really want

to focus the use of those tax dollars on things that can only be paid for. with taxes. Anything that can be paid for in another way probably should be so you can keep room for things that can only be paid for through the off the tax base. So for that reason in others, it was a good idea that was then inevitably politicized and never really lived up to its potential. I worry that we're going to see something as bad or worse in this case. I can't say I've seen everything that's been written on this, but I saw some reference to the Prime Minister justifying this on the idea that, well, we provided the regulatory basis for this, project. So we should be able to sort of back into a share of it, which is, if that's an accurate

quotation or something along those lines, I'd be very worried. So long and the short is, I'd like, I'd like to see more of the fine print on this. Maybe it's more defensible than it looks on the surface, but it just looks like something that there's, it's a solution in search of a problem, I guess. 78 billion dollar deficit last fall. So again, I'm just trying to understand why this particular formulation of a wealth fund. These are borrowed funds. I just before coming on air, I looked at what does it cost the Canadian government to borrow 10-year money, so approximately, you know, the midpoint of their yield curve, the average may be of what their borrowing costs. They might be a bit lower.

They might borrow closer to the shorter end, but, you know, it's three and a half percent. So you're announcing a fund that you're encouraging Canadians to invest in. There's some language here that Canadians would be able to invest their savings in the fund. Government starting the fund down three and a half percent on an annualized basis. I don't know, Andrew, and the name of it, again, we're getting this kind of almost Mike Harris-like political language being injected into government programs. In this case, it's the strong, you know, everything has to have strong. in it now for a government program or a government announcement. Andrew, is all of this just simply, I don't know, kind of a kabuki theater as opposed to meeting

the moment, as opposed to what this prime minister has been talking about for the last 12 months, which is rupture, the need for Canadians to step forward in a way that they have not within generations. He harkens back to the Second World War. He's harking back to the War of 1812 with his small statue of. Sir Isaac Brock. You can tell I'm a little frustrated here, but I'm just kind of confused about the seemingly unsuriousness of this proposal, as it's defined, versus the rhetoric, the branding, and this kind of daylight that seems to be constantly emerging between what this government

argues we should be doing and then what we actually end up doing. Well, now that me, having been very skeptical off the top of the economics of this, maybe cut them a little bit of slack and give them a little bit of the benefit of the doubt and just thinking aloud here. You're absolutely right that there's been a lot of kind of military references. That video that he gave out was quite striking

in the use of wartime metaphors which may tell you that what kind of things are coming down the pike not a military invasion but difficult times vis-vis of the United States. So if you think that we're in some kind of

security crisis in that regard, some kind of quasi-wortime economy, not really, but where national security or geopolitics enters the fray, you might be prepared to stretch a little bit of an economic. Let me give you another example. The Churchill Port Project, anybody looks at the economics of that purir-a-doer would say it's very short season, you can only ship certain types of things through it. It probably doesn't make a lot of sense economically. If it was part of a geopolitics thing where somehow we'd be able to get resources to markets for reasons that were beyond economics and had to do with buttressing Europe against Russia, et cetera, you might be willing to bend a little bit. You talked about him offering the chance for private

investors to invest in this, small investors kind of thing. It kind of reminds me a little bit of buying more bonds. Yeah, that's what I thought. And again, it will have have to look and see what this is actually intended for and what the projects are and how much economics, the usual economics, which I outlined at the top, should be the driving force. And to what extent there's any, and some kind of national security implications. But don't you think that's, I'm going to give it the best possible basis. But don't you think, Andrew, that's the key issue. It's that a lot of these projects, despite the rhetoric up to this point, will be deeply uneconomical. Pathways, carbon sequesteration

is hugely expensive, unproven at the size that he's demanded of it in order to greenlight a pipeline. And industry may be quite reasonably balking from the idea of spending possibly tens of billions of dollars on an unproven technology to create a product that, yes, is slightly less carbon-intensive than other forms of oil, but to the end buyer, it will make no difference. It will command the same price as a barrel of oil that has not gone through carbon sequestration. I guess what my frustration is, why not just level with us? Why not just say some of these programs like Churchill Falls or pathways are un-economical. The government will have to step in and fund this.

And we will do this. And we will do this with borrowed money because we think this is in our long-term interest. Instead, it's this. And again, it's not just his government. It's a disease within politics now. Everything is about communication. Everything is about the spin. This is the strong fund that is going to be.

a wealth fund, debt finance, wealth fund, Andrew. Come on, you know this is just cockamamie. Well, you don't just see that in the government sector as well. You also see it in the private sector. Whenever private companies are arguing for some kind of subsidy, they never ask for a subsidy. It's always some really complicated tax thing that they dress up as somehow being an economic idea. When you delve into it, you find, no, it makes no sense in economic terms. It's just a a disguised subject, but it's easier to sell political. Rural connectivity, where they're dropping internet connections to million-dollar cottages in Georgian Bay at tens of thousands of dollars a cottage to meet their target of rural broadband connectivity. So I agree with your broad point that in general,

if you're going to do a subsidy, it makes way more sense economically and otherwise, just make the subsidy explicit. Just give money to the people you're giving money to, and everyone can see it, decide whether it's economic, justifiable, or politically justifiable, at least they know what it is. So there's a lot of arguments for that kind of transparency. You know, let me give a counter example, again, just to play devil's advocate. If you're talking about that carbon sequestration project, and I know you're very down on generally, and you're not down on it, I just don't think there's... And you may well be right.

It's true. I hope it's successful. Here would be the best case scenario for it is it's a way. where if you look at the terms of that deal, they don't get the carbon sequestation unless they agree to the carbon price, and they don't get the pipeline unless they agree to the carbon sequestation. So it's a way of locking everybody in so that people can't sneak away from the table. If carbon sequestation makes possible a pipeline that turns the temperature down in terms of Alberta-Federal relations at a time when there's people talking about a referendum,

It has symbolic value quite beyond the economic value of the pipeline. You could make a kind of an argument that says, look, this is the price of making this mess go away and calming everybody down. Not saying it would all be justified if you looked at all the ends up. But that's where you get into non-economic. I can't believe I'm making this argument. Because usually nobody makes the economic argument at all. No. So I tried to do that off the time.

I know. But now I'm giving you reasons why people would be looking around and saying, saying, okay, here's why we're doing this. And you and I can look at that and go, does that actually make any sense? Does that justify, does the political gain or the national unity gain justify the faulty economics? Those are judgment calls.

Yeah. But, Andrew, you and I have talked about this before. We agreed that this spring economic update leading into the fall budget is an important time to gauge this government. They have a majority. They are leading by 12 to 14% in the polls. This is a Oxford-trained Ph.D. economist who's led two major G7 central banks.

He knows what's wrong with the Canadian economy. He knows that it's sclerotic. He knows that it's uncompetitive, that it's over-regulated, that our tax system is an urgent need of a re-haul. What have we got? We've got grocery HST rebates. We've got federal fuel tax rebates. And now we have a sovereign wealth fund, a wealth fund funded by debt. And a cut in the income tax rate at the bottom level that has no productivity enhancing benefits whatsoever. So I think we're both sympathetic, maybe you more than me, but I'm still sympathetic to the notion that this is an urgent moment for the country, that we face real challenges, that we are being asked called upon to meet the moment. Where up into this point can you

indicate one serious action that has incurred political cost and has been communicated in a forthright, honest way with Canadians saying this is what we need to do. Here's why we're going to do it. You may not like it, but this is the way forward. I completely agree. I mean, what we're getting so far is the worst of Justin Trude and the worst of Pierre Pauillier. Right. I mean, some of the stuff was been stolen polyev, but it's never been the good stuff. It's been the cheap populist stuff or the expensive popular stuff. And similarly, a lot of the same types of economics that we saw under the Justin Trudeau government. So certainly there was that huge buildup to the first budget last fall, and it was a real damp squib.

A lot of talk about, you know, need to spend less to invest more, but there wasn't much in the way of reductions. in current spending and not really much in the way of new investment beyond a lot of fiddling with the numbers. So it was, by common consensus, was a bit of a bust that first budget. Here we are, this is not a full budget. This is a, now what we're calling a spring economic statement because they've changed the schedule. And the longer time goes on, the less you're going to be willing to say, well, you need time to get your plans in order. you certainly can't, as you suggested, you certainly can't plead, oh, we're in a minority government, we can't afford to alienate constituencies, etc.

It's a narrow majority, but it's a majority. And certainly the longer time goes on, the more you're, the harder it is to use your political capital you've built up. So if you're this far ahead in the polls, this early in your mandate, and you have any understanding of whatever of what you properly point to is the size of our economic challenge in terms of getting our productivity up. Productivity's been declining for decades in this country.

Declining, not just low, but it's been falling. Productivity and economic growth has been falling. We're now at the stage where, you know, we were in recent years where per capita GDP was actually declining. Why? Because we have very low rates of investment. Not enough, in fact, even to replace the capital as it depreciates and is taken out of it.

service. So capital per worker has been declining. And so we have an urgent necessity, first of all, to make the kinds of structural reforms that will raise our permanent long-time growth rate, not short-term stimulus, but long-term microreforms, tax reforms that raise our rates of investment, A, and B, have incentives, and by incentives, I mean competition, to use that investment to maximum efficiency. So we have a problem with low rates of investment, and we have a problem with low rates of competition, where in too many sectors of our economy, they're basically run as big, sluggish oligopolis or even public monopolies, and that has to change. So there's a very well-known set of reforms that are required. They're not terribly controversial

in the public policy set. They have shown no understanding or, I mean, possibly they have that understanding behind the scenes, but they're certainly not publicly declaring it so far. So that's a set of issues right there. The second set of issues, issues is we have these quite large deficits. They're not insanely large, but to be running deficits in excess of 2% of GDP basically at the top of the business cycle. Yeah. When you should be in surpluses, when, you know, they like to compare themselves to other G7 countries, all of whom are in a mess fiscally. So the fact that we're not as big a basket case as the United States, for example, is not a real, should not be a source of pride. The C.D. Howe Institute just put out a very

scathing report on this saying we're now heading we're now around if you combine the federal and provincial net debts net debts that we're taking out the CPP and the QPP which really shouldn't be able to do because it's not like you can sell them off to lower your debts but even taking on surface net debts combined of I think it was 82% of GDP well when we got into trouble in the mid-90s now admittedly interest rates were a lot higher and a lot of things were different we were at about 100% yeah feds and provinces combined so we're creeping up and this is you know, these forecasts that show them

gently declining in decades to come. Assume nothing goes wrong like, say, a crazy Iran war that allows the strut of Homo's to be taken over and oil prices go up and inflation goes up and interest rates go up. So we're really skating close to the edge to say the least fiscally.

So you would hope we would see if they don't have to do it all in one statement. But you'd hope there'd be some flag, some suggestion that stay tuned folks we're going to bring forward more microeconomic reforms to bring up our productivity rate and more spending controls and spending reforms because if you really want to make substantial cuts in spending you can't just you know cut everybody's ration of paperclips across the board you've got to make decisions what should government be in and what should government

not be in much more substantive structural types of decisions and they show no signs of getting into that either so i don't want to completely prejudge it we'll see see what they say on the 28th, but the portents are not good. Last question. I mean, you've watched and studied up close, Canadian Prime Ministers right back really. I guess Marroni was when your kind of journalistic career began. Something happens, doesn't it, Andrew, where people go into politics, generally, I think, because they want to be liked.

There's the odd exception. Maybe Stephen Harper was, I'm not sure how much he wanted to be liked. But he ended up, I think, liking being liked. Maybe that was partly why his majority government, his final government accomplished so little. Is there a danger here that we're seeing in Mark Carney a similar pattern, that the office has its own attractions? And that people start thinking in that role early about the history books, about their entry into the Canadian Dictionary of Biography. And I have a two-term prime minister that's table stakes. I had back-to-back majorities.

Maybe I, McKenzie King always circles out there as the kind of gold standard for longevity and dominance over the country. There are other prime ministers that might rise to that level. To what extent is some of this stuff just very human at the end of the day? You've watched these guys, you've seen them up close. do you think that's part of what we're seeing with Mark Carney that yes you have this political capital but it feels it doesn't feel good to spend it because we we like being liked and we like being popular and to have the country behind you and all your friends of the G7 slapping you on the back telling you what a fantastic job you're doing how wonderful your speeches are you know

that's a pretty nice petri dish to be to be cultivating it. I think there's a lot of truth in that. We all like to be liked. People in politics press more than most because that's the nature of the business. There's two types of errors that politicians, leaders tend to make. One is not to build up enough political capital in the first place. And the second is once you built it up, not to spend it. Yeah.

And if you really want to be in the history books, you're not going to go in the history books. They're not going to record. He was very popular, right? They're going to record the one or two big things that you did or didn't do. Why do we remember Moorini? Well, free trade and the GST and getting started on the deficit, although it was a very mixed. South Africa. South Africa.

But, you know, free trade and the GST, I think, would be the things that would most come to people's minds in terms of things that materially improved economic policy in this country. Jean-Cretchen, you know, Debt, you know, conquered the deficit and the Clarity Act. You know, these are in 10-year things, and you're right. We don't remember a lot about Harper. I don't think it was necessarily that he liked being liked in his case. I think it was he got too tactically clever and strategically stupid. He was just too intent on all the little machinations and triangulations and supposedly incrementalism,

but it was incrementalism to nowhere. The Trudeau years we had legalization of marijuana, I guess. The child tax. And, you know, so not huge accomplishments, but the important ones in their day. Hundreds of billions of debt. But he's not going to be a member for a lot of big things. So the point being, any government, any prime minister, matter how successful, there's a limited number of things you're going to get done just because that's the nature of the beast.

And you really have to focus on a couple of big things and then dedicate yourself to ramming those things through. So being strategic, being husbanding your capital, not spending it too fast, trying to make yourself popular so you can get the difficult things done, those are all fine. As long as you're doing these things in the service of those big things, as long as you're not doing it just for its own sake. It's similar with other shortcuts, if you will, that politicians take. Sometimes they're not the most likable people. Sometimes they do nasty things. Sometimes they do unethical things even.

And the great ones who were not without their foibles. I mean, you know, Abraham Lincoln is sometimes remembered as something of a saint, but he wasn't, if you read his actual historical record. He was not above down and dirty politics, but it was in the service of doing big things. Yes. And what distinguishes the greats, the ones we remember fondly, Sir Johnny McDonald was, you know, a low-ball, sleazy guy,

in many respects, but we remember him for the most part. Obviously, it's a tarnished reputation in some ways, but founding the country is a pretty big thing. Yeah. And the other things go rather lower in his biography. So that's the difference between the greats and the less greats is not that they were necessarily the most sublimely ethical people because politics doesn't leave a lot of room for that.

It's did they have their eyes on the larger prize? Did they use their slimyness and or likeability? to big, important things, or did they just do it just for the sheer love of the game, which describes too many politicians in general? Yeah. We're going to talk straight at home as another day because I want to keep this conversation going, and I don't hold you past the half hour. Is there something that's changed post-COVID, or maybe it started before COVID,

where state capacity has declined. So that even to be sympathetic possibly to Mark Carney, Part of the problem is even if you have the political capital to spend, the system cannot out the result. I think that predates COVID. But it's getting worse. Oh, yeah, I agree. But look at things like military procurement. That is a scandal going back decades where we either don't get the money out the door at all or when we do.

It's for politicized purposes. It's for jobs for the boys. It's for empire building by the bureaucrats. It's for over-specified, gee whiz, whiz, pie in the business. sky machinery for the for the for the military brass it's never or I'm over generalizing but it's never it's not enough for let's get the most effective machinery and equipment for the most bang for the most for the most for the newest bucks for the military fighting men and women and and so that's a

an enduring national scandal you know government in general in this country has tried to do too many things that that weren't part of the the basic rationale for government so there's a that's a that's a that's a that's a It's been an overwhelming trend for many decades now with occasional, you know, we cranked down the controls when we're just about to be shut out by the IMF or bailed out by the IMF. To our credit, you know, when we were that close to the wall, we did roll up our slaves as a country and fix it for that period of time. But as soon as the pressure was off, we went back to. Do you think we could fix it again today if we had to, honestly? This is the question is.

Both the population? Are they willing to accept the? I think for some things. I mean, you know, I think we do need, for example, a major increase in defense capacity, and that's going to mean a increase in defense spending to a great degree. I think we could also ring more efficiency out of each defense dollar, but I don't think anybody pretends we can't, that we can reach the level of military capacity that we need to without a fairly major increase in spending.

Although, again, in the age of the drone, I hope we're not going to be buying a bunch of stuff that's aimed for wars that were 20, 30, 40 years ago. Why did I get into talking about defensemen? Well, I guess the extent to which people are willing. Oh, yeah. So the point being, you would not have had the political support in the public to do that until very recently. People would have said, oh, no, I want that spending to go to health care.

So people are properly frightened by the international situation, by the Trump threat, by the Russia threat in Europe. I mean, in Europe, they are gearing up now for a shift. shooting war outside of Ukraine, maybe in the Baltics, et cetera. People are dead serious about this. So I'm not sure we're fully aware of how serious the situation is in Europe. So people, nevertheless, I think are generally aware that the world's much scary or more dangerous place now.

And I think there really has been a change in public attitude. So public attitudes in this country, thankfully, both on issues and on parties, are more fluid than they are in the states. The states, it just looks like, you know, I mean, we're finally seeing Trump's support among Republicans has dropped down to, what, 70%? 65. It's amazing. It's above 10% on being generous, even among Republicans. But it's very hard to move people off of their partisan base in the United States. It's very hard. Similarly, people are so dug in on some of these ideological issues, whereas in Canada, there seems to be a bit more fluid. it would be a bit more willingness to move with the times.

And as I say, the experience of the mid-1990s, it should never have gotten to such a serious problem. But once it was, at least we did manage to rally as a country and say, okay, we've got to fix this and we'll give political support to whichever party is willing to do that. I hope that we're in a similar situation where I think, we've talked about this,

I think a lot of these issues that we've looked at as separate issues, whether it's national unity or the economy or defense are all kind of coming together as one issue now. And that's sometimes when you get political salience is when a bunch of different issues merge in the public mind. I mean, remember, the deficit in the mid-90s had come to symbolize sort of inability of governments to make decisions or to move forward

and it become a symbol of kind of political immobility here and in the United States. Maybe some of these issues, are now merging the public mind of, we are in a very dangerous situation, and we've got a bunch of these issues we've been neglecting or ignoring or letting ride for a long time, the economy, national unity, et cetera, democratic reform, I would put in part of that as well, that we've got to get serious about all of these things kind of simultaneously. And so I think viewing these things through a national security, national sovereignty lens may be the way to rally the

public to say, look, we've been complacent, we've been tink around the edges for a long time, We had a great run as a country, but we're now in serious danger. And we need to smarten up and sober up in a hurry. Yeah, well said. Well, we will see what comes tomorrow. Maybe many people are listening to this as the spring economic update drops. And then I think all eyes will be on the budget and the fall and the rhetoric between now and then. Do we see a vision begin to emerge?

Well, and don't forget, there'll be a lot of craziness. in between coming out of the States. Yeah. In the run-up to the midterms, in the negotiations or not on the Kuzma, it's going to be a very hectic, fraught six months. And a war that doesn't seem to be solving itself. Oh, that. Oh, that.

Andrew, thanks for coming into the studio today. I really appreciate it. Andrew Coyne, regular contributor here at the Monk Debates columnist at the Golden Mail, and author of the great new Canadian bestseller, Crisis of Canadian Democracy. We'll put a link to that in today's show. Show notes. Thanks for watching and listening to this edition of Monk Dialogues. I'm Rudyard 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. Rudyard Griffiths and Ricky Gerwitz

are the producers. Be sure to download and subscribe wherever you get your podcasts. And if you like us, feel free to give us a five-star rating. Thank you again for listening.