The Peter Zeihan Podcast Series - There Goes the Canadian Government || Peter Zeihan

Episode Date: December 26, 2024

Canadian Prime Minister Justin Trudeau's decision to demote former Finance Minister and deputy Prime Minister Chrystia Freeland has triggered a new round of speculation over his political future. Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/there-goes-the-canadian-government

Everybody, Peter Zion here coming to you from the base of the Tongarero crossing in New Zealand. There's like 120 kilometer an hour winds up at the pass, so we're kind of grounded until tomorrow. For those of you who don't speak, metric, that's really fast. Anyway, we have some 4G here at the cabin, so I am taking a request that has come in from 17 different people in the last two hours. And is Canada about to lose its government? It started raining. Anyway, is Canada about to lose its government? And the answer is, yeah, it looks like it. Let me give you the background here. So the liberal party, the ruling liberal party in Canada has always had a leadership problem. For the last 25 years, they've basically had no one. Basically no one who is intelligent and can actually make decisions in craft policy. And so, after being out of power for 10 years in the 2000s because of Stephen Harper on the conservative side, the liberal leadership basically said, you know, none of us have the charisma to be a competent leader that people just don't like us at all. So what if we picked an

empty suit, some guy with a pretty face and great hair and put him in front and moved his chin every once in a while, but actually didn't let him do anything and we just have a competent cabinet behind him to actually take care of governance. And the person they found was Justin Trudeau, who was a borderline failed kindergarten teacher, but he had the name. Trudeau, his father Pierre, had been Prime Minister years ago and was quite successful. Duke could move a room when he wanted to. But the guy is at best an airhead. And so the person who really matters on Canadian Affairs is a woman by the name of Christina Freeland.

Former journalist was on the Putin government's shit list long before it became cool to do so because she investigated him early on. I beat her in a debate about 15 years ago. she went on to become foreign minister, finance minister, and deputy prime minister of a G7 country. Let's call that a wash. Anyway, I think she is one of the smartest people alive in the world today. She's arguably the smartest person alive in Canada. She's certainly the smartest person alive in the Canadian government.

And she has been the person who has been responsible for recrafting what Canada means in the modern age. if you go back to before the end of the Cold War, the relationship between Canada, the United States was the only one that we mattered. We've always been their number one trading partner by a huge margin. And the way it worked was the Canadians were always the first people to show up when there was an international crisis to pledge their support. But then as the details were being worked out, they would ask for a trade concession for Saskatchewanian wheat

or Ontario auto parts or whatever happened to be. And eventually all of those exemptions to American trade law were folded into an after one as a kind of, thank you, codify in the situation. Well, Christina Freeland became foreign minister about eight years ago, and the same week she became foreign minister is Trump's first day in office during his first term. And the rule book went out the window. And Canada went from being like country number 35 that the U.S. thought about because there was Russia, there was China, there was Japan, there was Germany, the Chinese, but da, blah, da, da, da. all of a sudden, in a more nationalistic world, from the American point view, Canada all of a sudden is like number three, because it's our first, second, or third, largest trading partner based on how you run the numbers and has been for a couple decades. So she had to make it up on the fly.

And while you can fight with her over her politics, and that is totally fair, any successes that Canada has had in macroeconomic policy, in foreign affairs, and especially in relations with the United States, regardless of the American president, you can pretty much credit to her, because it certainly wasn't Justin. Anyway, she had a spat with the Trudeau leadership, Justin, a couple of days ago, and she left the government. Specifically, the trigger was Donald Trump threatening all those tariffs

on his first day at the job, and it's sounding like Justin Trudeau basically wanted to spend money to make the difference up. And since she can do math and she knows that she's not the United States, Christina Freeland realized that that would not be sustainable in the long run. She wanted something better. He wouldn't give it to her. She resigned as finance minister.

He offered a different job. She's like, nope, I'm out. And so the brains that behind the face are now out of government. And the question is whether this is the end. And it probably is for the Trudeau government. Now, we were going to get here anyway. Canada at the national level rarely has politics that are stable as the United States, and I know.

That's because it's a confederation. A confederation is a place where the individual states or provinces have actually more power than the nation. So you have basically 10 different sets of economic and sometimes even foreign policy going on in Canada, which gets you a much more fractured political system with a lot more variety than we have between, say, Mississippi and New York. In addition, the electoral system is skewed in a different direction, so it encourages smaller parties, especially regional parties, to participate in the fray, rather than the two

big tent parties that we get. And so you get fringe parties like the NDP, which are basically, they wouldn't do very well in Berkeley because Berkeley's too conservative. You also get regional parties that are more nationalistic driven, like say the Block Quebequa, which in the past has argued for secession or the Wild Rose Party in Alberta for the same thing. Anyway, what this means is at the national level, you get a kaleidoscope of groups in their parliament, their equivalent of Congress, forming a government can be difficult and maintaining that government can be difficult. And one of the parties that formed this most recent government, the NDP, left the coalition earlier this year, but has not voted against the government in parliament.

So now we've got a split in the ruling liberals with the brains in the face on different sides. So really, the ball is in Ms. Friedland's court. If she decides that she wants to oust the government, she can do it with a simple vote. she has enough followers in the parliament, it would be an easy play. If she decides she wants to take over the liberal party herself, she certainly can do it and maybe put an end to the 25-year drought of not having an intelligent person at the helm. Whether that means she would actually win the premiership in a new election,

that remains to be seen. The guy on the conservative side is relatively untested at the national level. They've been having a series of leadership problems ever since Harper as well, and so it would be kind of a crapshoot. the issue that is defining most political conversations in Canada today is actually a bipartisan issue. Back 25 years ago, the Canadians were one of the most quickly aging societies in the world. And then under the conservative Harper government, they started to open the door to immigration a little bit wider every year. That continued under the Trudeau government.

They realized that if they didn't start bringing in lots and lots and lots and lots of people under age 30, that their country was going to age into oblivion, much like the Chinese or the Russians. And that was decided that that was not a great thing. And immigration was their solution. And it's worked, kind of. It certainly had that off the labor problem. It certainly rounded out the bottom of the population structure, which will buy them 20, 30, maybe even 40 years without a change in policy.

The problem is, when you increase the population of your country by 10 to 15 percent in 15 years, you have 10 to 15% more people that need some place to live. And since they're coming from another continent and then they flew there, they've got a little cash with them. They've got a skill set with them because that's how your immigration system works. And they can afford to buy a house which drives up the price of living for everyone. So in many ways, the partial solution that the Canadians have found have generated an inflation problem.

Sound familiar? And so that is the dominant economic issue and there's no clear patch there. The Trudeau government has dialed back immigration, reducing, say, university sponsorships and things like that. And it's already contracted severely the number of people coming into the country, which is going to generate a labor shortage, which is going to generate inflation, which is another problem. So it's like there's no easy fix here. And whatever the solution is, I can guarantee you that the person who comes up with it is not going to be Justin Trudeau. The question is whether it can be freeland or a conservative challenger, or maybe the right way to phrase that is not whether or not they have the answers, whether you can convince the electorate that maybe they do. So that is the issue. Relations with the United States actually at the moment are secondary, and think of how big that is.

So your primary trading partner, 80% of your total trade for a country that is internationally wired south is threatening to put a 25% tariff on everything you should. send. I mean, that would be crushing for a lot of commodities and a lot of manufacturing, and that's all Canada is. And that's not even the big issue. The big issue is how to deal with immigration and labor force issues caused by migration or lack thereof. Believe it or not, from an international point of view, from a Western point of view, these are great problems because Canada has managed, under the last two governments, to do something that very few governments in the West can do. They've bought time. And so now they're being able to wrestle with the second order effects. It's pretty much a positive mark for everyone, except Justin Trudeau.