The Holy Roman Empire was neither an empire, nor Roman, and its behavior was far from holy. Yet the title sounded impressive. Prime Minister Mark Carney seems to be employing a similar marketing tactic with the federal government's latest scheme to borrow money and distribute corporate welfare.
What Is the Canada Strong Fund?
Carney announced the creation of the Canada Strong Fund, billing it as “Canada’s first national sovereign wealth fund.” However, the reality is starkly different. Carney is not saving wealth; he is borrowing more money. The fund is built on billions of dollars of borrowed money and will gamble taxpayers' money on corporate handouts.
Comparison with Norway's Sovereign Wealth Fund
To understand the flaws, compare Carney's fund with Norway's sovereign wealth fund. Norway builds its fund by saving oil and gas revenues, not by borrowing. Instead of saving existing wealth, Carney is borrowing another $25 billion to start his fund, after a decade of continuous borrowing by the Canadian government.
Norway's fund invests exclusively abroad, protecting taxpayers from politicians who might spend savings on domestic pet projects. In contrast, Carney's fund will spend on Canadian companies deemed “nation-building projects” by the government.
Norway's fund has strict spending rules: politicians cannot touch the principal, only the interest. Carney's plan mentions no such guardrails.
Norway reaps the benefits of these rules. Since its first deposit in 1996, the fund is worth over $3 trillion and is the world's largest single investor. Returns cover up to 20% of the Norwegian government budget, and Norway has balanced its budget consistently since 2020.
Other Examples of Real Sovereign Wealth Funds
Alaska's heritage fund, created after oil was struck in the late 1960s, deposits 25% of non-renewable resource revenue. Politicians can only spend interest, and every Alaskan resident received $1,000 last year from investments. Saudi Arabia's and Singapore's sovereign wealth funds are also built on actual wealth, not debt.
Historical Failures in Canada
Canadians need not look far for examples of such plans gone wrong. In the 1980s, the Alberta government used its heritage fund to hand out taxpayer-funded loans to local companies, including a paper mill and an oil upgrader. Taxpayers lost millions on both.
Carney's Canada Strong Fund is a debt-fuelled corporate slush fund, not a genuine sovereign wealth fund. Real sovereign wealth funds are a great idea when done right, but this is not one of them.
