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Prime Minister Mark Carney looks towards European Commission President Ursula von der Leyen, seated left, as he addresses the European Parliament in Strasbourg, on Thursday.Justin Tang/The Canadian Press
The man who’d be living in 24 Sussex Dr. if it were habitable spent this week laying out his plans for a renovation of Canada’s economic and geopolitical architecture.
Prime Minister Mark Carney’s agenda this week included: a Davos-style gathering of mega investors in Toronto; the announcement of a so-called productivity mega deduction for certain business investments; a proposal to privatize Canada’s biggest airports; and an overnight flight across the Atlantic to talk about a closer tie-up with the European Union.
The ambition is vast. But many of the hows and whys are still in the early stages. It was a week of sowing (and sometimes merely talking about how and where to sow), not harvesting. The harvest is years distant, and depends on execution. And maybe a bit of luck.
The targets of Mr. Carney’s week of shock and awe were the two big challenges facing Canada: prosperity and sovereignty.
The prosperity challenge is largely a product of weak business investment, which feeds into sluggish productivity growth.
Carney lays out case for deeper alliance between Canada and the EU
The Trudeau government operated under the impression that supercharged population growth would be a solution. The Carney government gets that what needs supercharging is business investment – so that it outpaces population.
If your ditch-digging business adds employees at a faster pace than shovels, productivity per worker will fall. If the opposite happens, productivity will rise.
Economy-wide productivity, and gross domestic product per capita, are no different.
Insufficient business investment in Canada long precedes Donald Trump’s return to the White House, but the U.S. President’s tariff war threatens to severely exacerbate things.
Not only does the U.S. constitute the lion’s share of Canadian trade, many Canadian industries are basically limbs on a North American economic body. Cut off their blood supply – access to the U.S. market – and their investment case may wither.
Does it help if a couple of hundred senior executives, representing tens of trillions of dollars in investment capital from around the world, spent 48 hours in Toronto, schmoozing?
It can’t hurt.
That said, take with a large grain of coarse salt any investments announced in conjunction with the summit, notably commitments by Canadian banks and public pensions to invest more in Canada.
Key moments from the Canada Investment Summit
They don’t need a phone call from the Prime Minister’s Office to accurately assess investment risks, returns or viability. They have enormous teams paid handsomely to think of nothing else.
And if a call from the PMO can get them to reallocate billions of dollars, this country has a bigger problem.
As for the foreign investors at the conference, such as giant New York-based asset managers BlackRock and Blackstone, they are already very familiar with Canada. As an investor who attended the summit reminded me, they do a vast business with our pension funds. That their top executives were on stage, talking up investing in Canada, it is at least in part because those customers asked them to.
Can a two-day investing confab “catalyze” and “crowd-in” more investment?
Dilhan Pillay, CEO of Singapore’s state-owned investment fund, Temasek Holdings, offered one possible answer.
“I tell everybody, we’re not in the investment business,” he said during a panel session on Tuesday. “We’re in the people business.” If investing was solely about crunching numbers, AI could do the job. But “it’s about forming relationships, networks … seeing people for who they are and if you can trust them with your capital.”
Schmoozing is part of the investing process. It deepens relationships and makes new ones.
But as a Canadian investor who was in the room put it to me, the people in attendance were all CEOs and the like, and they helm huge organizations. They have hundreds of people below them whose job is to discover investment opportunities and bring them to the top – not the other way around.
“Not one person on that stage,” he said, “has sourced a deal in the last 20 years.”
Creating an attractive shop window display never hurts, but at the end of the day it’s about what’s in the store. What matters to investors, international or domestic, is what an investment will do for their bottom line.
That’s why the productivity mega deduction could be a big deal. Allowing businesses in many sectors (though not all) to fully write off capital investment costs in the first year, rather than spreading the deduction over many years, could spur more investments.
The move shouldn’t cost Ottawa anything in the long run, since it’s merely compressing the time frame of an existing multiyear deduction. It could, however, make some marginal investments viable.
Opinion: In Strasbourg, a muted Carney reins in EU enthusiasm and gives no answers
That said, a marginal shift in the marginal tax rate won’t move the needle enough for other investments. If the U.S. erects permanent tariff walls against Canadian cars, the upside of a quicker return on investment in a Canadian car plant is unlikely to compensate for the loss of the U.S. market.
Which is part of the reason Mark Carney flew to Europe.
It’s unclear what a closer relationship with the European Union would entail, or even what to call it. Associate membership? Alliance? What is clear is that each can help the other economically, to weather tariffs from Washington and the omnipresent Chinese industrial threat, and each can help the other to maintain its sovereignty.
What’s been made public about what comes next with Europe is thin. It may still be at the cocktail napkin stage. But you have to start somewhere.
And then there’s airport privatization, which Mr. Carney threw into the mix this week. That idea also appeared to be sketched on the back of a napkin; the PM and ministers struggled to clearly articulate what they’re up to. They couldn’t explain how our airports currently work, or why they want to change things.
Almost everything at Canada’s major airports, from airlines to the restaurants in the terminals, is private. The air-traffic control system is run by Nav Canada, a not-for-profit corporation that was privatized 30 years ago. The airports have independent boards and operate on a user-pay model, with no government subsidy. Some even pay rent to Ottawa.
A generation ago, Ottawa moved the air travel industry off its income statement. The goal now should be to move the airports off the balance sheet.
Take that balance sheet of comatose assets and put them to work. Free up that capital to invest elsewhere, for the benefit of Canadians. Keep it clear and simple.
My proposal last spring was to use every cent from airport privatization to finance public-transit projects in those regions where the airports are located. Raise tens of billions of dollars from Toronto’s Pearson Airport? Invest tens of billions of dollars in new subway and light rail lines in the Greater Toronto Area.
The government has instead talked about privatizing the main airports in Toronto, Montreal, Calgary and Vancouver to finance … airport improvements at minor airports.
Raise billions of dollars from Toronto Pearson to build new terminals in Moncton and Thunder Bay? Hunh?
In Canada, as someone once said, better is always possible. There’s still time to modify these flight plans.