Prime Minister Mark Carney's announcement of a new Sovereign Wealth Fund for Canada, the Canada Strong Fund, signals the return of big government. However, big government never truly left Canada. Even under supposedly conservative governments, tax dollars are often used to pick winners and losers in the economy, doing what the private sector should but won't.
What is the Canada Strong Fund?
Carney unveiled the Canada Strong Fund on Monday, a $25 billion initiative to be invested over three years. The fund aims to catalyze nation-building projects in energy, trade, critical minerals, transport, data, and beyond, making Canada stronger, more resilient, and more independent. But critics question how this fund differs from existing ones like the Canada Infrastructure Bank, the Canada Growth Fund, the Venture and Growth Capital Catalyst Initiative, or the Strategic Innovation Fund.
A Crowded Field of Government Funds
Canada already has numerous government funds and agencies designed to boost the economy, including the Canada Infrastructure Bank (boosted from $35 billion to $45 billion last November), the Canada Growth Fund ($15 billion), the Venture and Growth Capital Catalyst Initiative, and the Strategic Innovation Fund. Additionally, there are regional development agencies, the Business Development Bank of Canada, Export Development Canada, and more. Carney's new fund adds another layer of bureaucracy to an already crowded field.
During his news conference, Carney stated that the infrastructure bank provides loans while the new fund will take equity or ownership stakes to generate more money. However, the Canada Infrastructure Bank also takes ownership stakes, raising questions about the distinct purpose of the new fund.
More Bureaucracy, Same Problems
Carney's approach mirrors the Trudeau government's tendency to prioritize announcements over effective policy. The Major Projects office announced last summer has not advanced any project not already underway, and the Build Canada Homes organization has seen declining home construction. The Carney government appears focused on building more bureaucracy rather than delivering tangible results.
A Better Alternative: Private Sector Investment
Instead of creating a Sovereign Wealth Fund funded by debt, the government could improve the investment climate to attract private-sector funding. Ideas include eliminating capital gains for those who reinvest in Canadian companies, lowering personal and corporate income taxes, reducing red tape for project approvals, and expanding full expensing of capital costs. These measures would not require $25 billion and could yield substantial returns without allowing the government to take credit for projects.
In conclusion, Carney's Canada Strong Fund is not a transformative idea but another bureaucracy that adds to the existing list of government funds. The real solution lies in fostering a better environment for private investment, not in creating more government entities.
