Opinion: Ottawa urged to play greater economic role

They decide which stores will have to shut down, who can stay open and under what conditions, who gets wage support, who gets loans, who gets bailed out, who is left to survive on their own.

The hands of governments are everywhere in the economy during the pandemic. And it’s becoming obvious that they’re not going away – even when we start to recover.

With vaccines slowly being distributed across the country and the prospects of freedom inching closer, federal planning for the recovery has started in earnest, with an important budget on the horizon and widespread consultations in the works.

While federal involvement in the economy will look a lot different in the recovery stage than it does in the midst of the brutal second wave, it will be omnipresent all the same.

And for the most part, that seems to be just fine with many business leaders. In fact, they’re inviting it.

“It is time for government, with an industrial policy, to support the overall direction” of the Canadian private sector, says Monique Leroux, the former CEO of Desjardins Group and now chair of the Industry Strategy Council, a group of top business leaders asked by the federal government to advise it on how to handle the economic side of the pandemic.

The council has been talking throughout the pandemic to businesses large and small in all corners of the country, advising senior government officials and cabinet ministers in real time how to tweak business supports, how to help labour, and how to safely restart the economy even as the coronavirus rages.

Now, it has set out a longer-term strategy to pull Canada out of its funk and make sure the path to recovery shakes us out of the complacency of the past.

But unlike the inclination from the private sector of previous eras to shove government out of the way and let unfettered capitalism thrive, they want to see government as a full-fledged partner.

“The concept is to bring a strong portfolio of public investments and private investment in a kind of renewed partnership between government, Canadian companies and pension funds and financial institutions in Canada to fully position our leadership in the world, (in areas) where we think Canada as a middle-sized country could make a difference,” Leroux said in an interview. “That’s the rationale.”

This doesn’t come out of the blue.

The United States and the United Kingdom are doing it, Germany and Israel are doing it, China and South Korea too.

The protectionist tendencies of U.S. President Donald Trump prompted a doubling down on government involvement in economic direction in countries around the world.

And then came the pandemic, showing countries in no uncertain terms that governments needed to be activist and even aggressive to ensure they have adequate medical supplies and vaccines.

But Leroux’s network told her that Ottawa’s involvement can’t just end with vaccines. Instead, it needs to become more strategic – and government insiders across the board have heard the appeal.

At first, the government’s involvement will come in the form of stimulus – up to $100 billion that Finance Minister Chrystia Freeland has already set aside to repair the damage caused by the pandemic. Training, infrastructure and other time-limited spending will form the bulk of the stimulus package – standard fare in the wake of recessions.

But the government has signalled on many fronts that it won’t stop there. Freeland has indicated she will actively push Canada’s digital prowess.

Leroux’s council also wants to see federal support for leveraging data and intellectual property, ramping up the agri-food sector and promoting advanced manufacturing. We’ve heard similar recommendations from the likes of the Business Council of Canada and the economic advisory council to former finance minister Bill Morneau, led by Dominic Barton, now-ambassador to China.

There’s every indication that the government is all ears.

But what if the government chooses wrong? Fans of a modern industrial strategy say they’re not advocating for government to pick winners. Rather, they say Ottawa spends billions every year on all sorts of incentives and subsidies for businesses. Instead of spending willy-nilly, they should have a strategy that pushes companies to be more competitive in the areas we are already good at.

It’s high risk. If governments, the financial sector and companies alike make the wrong bet, we will have wasted many billions of public and private money on mediocrity rather than excellence. But if they bet right, we’ll have jobs and profits for the next generation.

It looks like it’s a bet they’re all increasingly willing to take.

Heather Scoffield is a National Affairs writer.

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