Tweedle Dumb And Tweedle Dumber: Neither Major Federal Party Gets It Right

It has been an incredible reversal of fortune for each of the two major Canadian political parties since November, and also the NDP, if you believe the many polls in the last few weeks. The only thing more incredible has been the change in the US since January 6th, 2021. Donald Trump has gone from pariah back to the White House, and has now become even more unhinged, reversing 80 years of US foreign policy and causing chaos in a variety of other ways with Elon Musk’s help.

Mark Carney was supposedly headed to be Finance Minister, then was gone from the picture, then came back to win the Liberal leadership, – without ever having run for political office before, let alone having served – and now looks to be headed for a majority. Justin Trudeau has now snowboarded into the sunset, for now anyway, after being forced to resign, with notes of similarity to Biden’s departure. Meanwhile, Pierre Poilievre looked certain to become Prime Minister, and then Chrystia Freeland’s sudden resignation came along as the first sign that Poilievre’s path to being PM was likely going to get harder.

Despite the controversy over Poilievre being supportive of the Freedom Convoy, his attack-dog approach of saying “Canada is broken” seemed to be working, though of course negative perceptions of him were high and he benefitted from Justin Trudeau being unpopular.

What we have ended up with is the collapse of the NDP, whereas a few short months ago it looked like the NDP was passing the Liberals, or that the vote would be split and the Liberals would head towards results like 2011. But some polls show that in fact, the Conservative vote has not changed much from 2021, while the Liberals are winning by taking away votes from the NDP, Bloc, and Greens.

Both the Liberals and the Conservatives are in effect having to develop campaigns and policies on the fly. Poilievre’s campaign is in disarray because issues like the carbon tax have been taken away from him, and because of the ever present issue of the trade war that President Trump is seemingly carrying out with the entire world, with Canada and Mexico getting the worst treatment despite the supposed protections of USMCA.

Carney won a convincing victory in the Liberal leadership race, with Freeland coming in second with a mere 8%. Carney has had to provide little in the way of policy announcements, other than eliminating the consumer portion of the Carbon Tax, which also eliminated the rebate.

In short, both parties and leaders are announcing new policies that are meant to fill voids. Carney is reversing many Justin Trudeau policies, in part to present himself as representing change, and to address key issues like the “housing crisis”, while Poilievre can no longer just promise to “Axe the Tax” given the only part left is invisible to consumers and is not new.

In his recent book “Values”, Carney was solidly behind the carbon tax as essential to deal with global warming. Eliminating the tax looked like a move to the right, which was consistent with the preconception that Carney, an economist and former head of two G7 central banks, was likely right of centre. That being said, Carney just announced a housing policy that is more left wing than any Liberal housing plans since Pierre Trudeau or Lester B. Pearson. Carney is calling for the government to actually build housing through a new crown corporation, provide billions of dollars in funding, and micromanage municipal development charges and zoning laws. This continues the approach started under Justin Trudeau of interfering in municipal and provincial jurisdictions, which is bound to cause problems with provincial governments in Quebec and Alberta.

Carney is calling for housing starts in Canada to eventually reach 500,000 a year, which would translate to about 1.2 million people per year, at a time when births barely exceed deaths and deaths will likely soon overtake births. There are calculations that Canada is massively short of homes – in the millions – but as the Liberals have made some cuts to permanent and temporary immigration in 2024, those supposed housing shortfalls are being cut.

As of writing, Carney has not announced an immigration policy, but did answer a question from a reporter stating that he would keep the recent caps on immigration, and not reverse them.

Carney has been criticized by Poilievre and others for recruiting Mark Wiseman to his leadership and general election campaigns. Wiseman was a co-founder of the Century Initiative “charity” that promotes immigration of 500,000 a year or more to get Canada to 100 million people by 2100.

In early 2024, the National Bank released a report stating that Canada was in a “population trap” – where GDP/capita was dropping because population growth was outstripping the ability of the economy to create wealth and good jobs. Even after some cuts to temporary and permanent immigration were announced in late 2024 by the Liberal government, immigration rates are still higher than in any G7 country, and far above the US.

In contrast, Poilievre has announced that he will tie immigration to the ability of the country to absorb immigrants. He has announced that this means capping immigration at 250,000, which is well below the Liberal 2025 target of 395,000 (which is set to drop to 365,000 in 2027). That being said, immigration levels under Stephen Harper averaged around 250,000 a year, and Canada was having housing affordability issues even then – as well as slow economic growth, and unemployment.

In 1961, Canada had the 3^rd highest GDP/capita in the world, behind only the US and New Zealand. By 2020, Canada was somewhere around 20^th, depending on the source and exact terms of comparison. Only two countries had both higher GDP/capita and a higher population than us – the US and Germany. France, Britain, Japan, and other countries with more people were all worse off than us. Bigger is not better, and if our competitive advantage is resources, then adding population dilutes that advantage or sees finite resources exhausted faster, leaving future generations far worse off.

Both leaders have announced a reduction in the lowest income tax bracket – though of course, a lot of people pay no tax after refundable tax credits are taken into account. Both leaders seem to accept the idea of eliminating internal barriers to trade, and Carney met with the provinces prior to the election call to discuss this issue.

Carney is to the right of Trudeau on the carbon tax, despite his past support for carbon pricing, and far to the left of the Liberals (for 50 years) on housing (because of his emphasis on the federal government being active in building and funding housing), while likely accepting the status quo on immigration, and possibly even increasing levels.

Poilievre has been struggling to come up with actual policies instead of criticizing Canada as being broken, especially at a time when Trump’s threats and insults have caused a surge in pride and nationalism among Canadians, including for our social programs. Poilievre has tended to go with the neoliberal or conservative tools of tax breaks. His pledge to increase the TFSA limit by $5000 seemed to be tone deaf – as if most average Canadians have $5,000 just sitting around.

Poilievre has had a hard time responding to Trump’s tariff threats, and he has the hardest time of any leader attacking Trump when a lot of Conservative supporters like Trump. Even Doug Ford, who is not helping Poilievre, said he would have voted for Trump.

Poilievre announced a big project on March 31^st – a national corridor. The press release includes the following:

“Conservative Leader Pierre Poilievre announced today he will create a ‘Canada First’ National Energy Corridor to fast-track approvals for transmission lines, railways, pipelines, and other critical infrastructure across Canada in a pre-approved transport corridor entirely within Canada, transporting our resources within Canada and to the world while bypassing the United States. It will bring billions of dollars of new investment into Canada’s economy, create powerful paycheques for Canadian workers, and restore our economic independence…

‘The choice is clear: a fourth Liberal term that will keep our resources in the ground and keep us weak and vulnerable to Trump’s threats, or a strong new Conservative government that will approve projects, build an economic fortress, bring jobs and dollars home, and put Canada First—For a Change.’ “

Carney has announced retaliatory tariffs against Trump’s policies, which of course are paid mostly by Canadians. But it is unclear what short-term plans either candidate will implement immediately after the April 28^th election. There might be talks starting soon on the trade and defense policies that were mentioned on Carney’s phone call with Trump, including advancing the renegotiation of USMCA/CUSMA. It is unclear what concessions Canada might offer – or more importantly, what grievances or demands we might make. This is particularly relevant if Trump continues to break trade agreements and demand concessions that will kill our standard of living through a death by 1,000 cuts.

Trump has shown an admiration of President William McKinley and the protectionist approach that the US followed in the 1890s, when Canada’s main response was Sir John A. MacDonald’s “National Policy” of high tariffs. In fact, it was only after World War Two that tariffs dropped between the two nations.

It seems to me that if Trump’s mindset is from the 1890s, the response of both major Canadian party leaders also reflect Canada’s economic strategies from the 1890s, instead of the world of the 2020s – or even the world of more recent decades, when we were evaluating how to prosper alongside the world’s richest market and economic powerhouse.

Canada’s economic strategy from 1867 to 1945 was pretty constant, with free trade with the US losing in the 1911 election.

Canada’s comparative advantage was seen as being in commodities and natural resources – the cliched “hewers of wood, drawers of water”. To create and export these commodities, we needed infrastructure – particularly railways, but also canals and ports. Canada actually had three transcontinental railways just before World War One, though all but the Canadian Pacific (CP) were merged into Canadian National (CN) soon after.

At that time, Canada needed immigrants, particularly to fill up the west. In those early days, the main point of Confederation was to unite provinces. MacDonald also wanted “free trade” between the newly created provinces, like the US had.

Canada’s National Policy was meant to counter the tariffs imposed by the USA. In both countries, the main source of federal government revenue until around World War One was tariffs.

Canada’s policy was to export resources, and settle farmland. The main value of manufacturing was seen as reducing imports and keeping our exchange rate high, so foreign investment was actually encouraged. Immigration was cut during the Depression and World War Two – but the US actually cut immigration earlier, in 1924, out of anti-immigrant sentiment and not for economic reasons.

After World War Two, education was added to the list of Canada’s priorities. We had our own equivalent of the US G.I. Bill. Like the UK, Canada added a lot of new universities and colleges in the post-war years, as well as student loans and grants. Canada now has among the highest levels of tertiary (post-secondary) education in the world, and the highest level in the G7. Meanwhile, Germany has about half our level, since it relies on apprenticeships and on-the-job training to maintain a highly skilled workforce for its industries like auto manufacturing.

So, Canada’s economic strategy traditionally consisted of the four pillars of natural resource exports, infrastructure, foreign investment, and immigration, and then the fifth pillar of education was added last. This is quite different from the US, which followed the path of Alexander Hamilton in putting manufacturing first, instead of merely supplying cotton or resources to then dominant Britain. Germany followed a similar path of industrialization, following the theories of Friedrich List. Japan, South Korea, and even China followed similar paths in what is termed “neo-mercantilism”.

Ironically, Canada became a major exporter to the British Empire because of American investment in branch plants that were used to send copies of US made goods throughout the Empire and to Britain itself by taking advantage of Empire preferences. That ended by the 1960s, and the Canada-US Auto Pact of 1965 was negotiated with the US to maintain Canadian auto manufacturing.

In the 1950s, Diefenbaker opposed continentalism, and in the Liberal Party, Walter Gordon was the man who pushed the Liberal Party and Pearson towards economic nationalism. The NDP also had economic nationalists like Mel Watkins and James Laxer, and the NDP helped push Pierre Trudeau’s 1972-74 government towards economic nationalism – in addition to the influence wielded by Gordon and his disciples within the Liberal party. By the 1980s, neoliberalism was ascendant with Reagan and Thatcher, and Mulroney opted for free trade in 1988.

Reagan’s view of the free trade deal was that Canada would provide natural resources, and Mexico would provide cheap labour, with the US in the middle with the capital, technology, and management to run the whole continent. Canada signed and became more integrated. Now, Trump is reversing course, with Canada having lost 35 years and a lot of its own major manufacturing corporations, including by US takeovers.

Getting back to the five pillars of Canadian economic strategy, the one that Canadians are getting with the Liberals is high immigration, though Carney is not actually running on that policy. Like MacDonald, Carney is offering tariffs to fight back against American economic aggression, but not making demands of the US and only playing defense.

Poilievre is running on natural resources and infrastructure, with the east-west corridor for exports. Again, this is not much different than MacDonald, though the Conservatives of today are more ideologically tied to Alberta and rural Canada – whereas the old Progressive Conservatives were tied to Toronto and Montreal.

So far, education has not been a major election issue, though many young people have high student loans. Biden was big on forgiving student loans, but neither major party in Canada seems to be going down that route. Neither major party is offering greater subsidies to universities and colleges, at the same time as these institutions are closing campuses and laying off staff because of the clampdown on foreign visas that prevents post-secondary institutions from earning the cash needed to make up for low tuition and insufficient government funding.

Foreign ownership is not directly mentioned by either party, as either a good or bad thing, but both parties are calling for more investment in Canada. Neither are saying where this investment will come from, except perhaps in the form of more government loans and subsidies that will be needed to fund Carney’s housing promises, which include $25 billion in loans.

Canada faced a similar crisis in World War One. Our economy had to suddenly shift to war production, and foreign investment was not the solution. Though branch plants were converted to wartime production, including truck manufacturing, a lot of the growth in capacity was done under CD Howe, such as building aircraft plants that were later to become Avro. When the war ended, a lot of that capacity was sold off to US companies instead of Canada following a path of building up our own companies with an ability to export, much as Japan and later South Korea did.

Later in the 1960s, the pace of foreign takeovers of Canadian (and sometimes British owned) companies here accelerated. The few limits on foreign investment put in place by Pierre Trudeau were loosened or eliminated by Brian Mulroney. Since then, free trade deals were often mainly about increasing the cross border flow of investment, rather than about trade per se.

What we are not hearing from Carney or Poilievre is about how Canada can better compete in high value-added goods and services, to displace foreign owned goods serving Canada – but more importantly, to generate exports.

A 21^st century strategy, which takes into account the risks of being overly dependent on the US and the need to diversify trade, would likely include asking these questions (applying to both goods and services):

1. Will it reduce imports?
2. Will it increase exports, particularly to places other than the US?
3. Will it raise productivity?
4. Will it be in a value-added industry or a commodity with prices based on commodity markets?
5. Is it in a new emerging industry or in an industry likely in decline in developed countries?
6. Is it a wise use of capital?

The key issue is not if we currently have a comparative advantage in something, but rather the question of whether we can be competitive and develop businesses that have a comparative advantage – what has been called the “infant industry” argument.

In 2000, before the tech bubble burst, Canada actually had a number of leading high tech companies – Nortel, JDS, ATI, Corel, Mitel. Those are all gone, and the biggest Canadian high tech company is now Shopify – and there were even rumours that Shopify would shift its head office and stock market listing to the US, as Brookfield did under Mark Carney with part of its operations.

A large part of the reason for why US economic growth has been spectacular has been related to IT – computers and chips, programs, the internet, smartphones, social media, and now AI. Most of this came out of California. Canada, Europe, Japan and other countries have lagged far behind – with the exception of China with its large population, authoritarian government, and trade barriers of various types. Canada may not be able to compete in everything high tech, but there are niches that Canada could find and focus on.

Because of Trump, the political debate in Canada has become more nationalistic, with key policy areas being trade, and also housing. Instead of Carney and Poilievre talking about innovation and how Canada can outcompete the US in knowledge-based industries, Poilievre is focused on pipelines and exports of energy and resources, while Carney is talking of doubling housing to astronomic annual rates that imply double or triple the current levels of immigration.

The Canadian news media has not been particularly helpful in offering alternative visions of Canada’s potential economic strategy to break with the five traditional pillars and adopt a more neo-mercantilist or innovation driven economy, with a few exceptions. One article was in The Globe & Mail on January 21^st by Robert Asselin, titled “Now is the winter of Canada’s economic reckoning”, which included the following:

“For decades, Canadian policymakers have been warned about structural issues that are holding us back, such as interprovincial trade barriers, regulatory gridlocks and tax competitiveness. Yet little progress has been made.

Competing in advanced industries – including biotechnology, aerospace, energy technology, cleantech and advanced manufacturing – is critical for modern economies. These sectors are key drivers of innovation and productivity, fuelling economic growth and creating high-wage, future-oriented jobs. Yet Canada’s current science and technology ecosystem is not delivering innovation at the pace of its global peers.

For Canada to catch up, it must focus on creating mechanisms that translate its public research and development investment in intellectual capital into private-sector innovation. This requires building institutions between the public and private sectors to bridge the gap between discovery and commercialization…

Canada’s comparative advantages are not limited to mining and agriculture. We have huge upside potential in advanced materials, energy technologies (including nuclear) and biotechnology.”

Another relevant article was in The Globe a week later, by Ann Fitz-Gerald and Paul Samson, under the headline “The next prime minister’s growth plan must focus on homegrown innovation”:

“Canada must adopt a clear economic strategy by treating the economy like a balance sheet and focusing on expanding the “pie” through growth while boosting paycheques. At the same time, a pro-competition agenda should drive down costs and give consumers more choice, creating a dynamic, thriving economy that motivates all Canadians.

Growing the economy must align with prosperity and national security goals. This demands leadership that champions the creation and export of high-value products that are competitive in the global market. Canada must break away from an economic model reliant on importing foreign ideas – such as electric vehicles – that tether us to long-term patent and royalty payments and allow other countries to use our resources as their innovation playground, undermining our sovereignty. A new leader must prioritize Canadian innovation, fostering a marketplace of ideas rooted in Canadian research centres and Canadian businesses, ensuring our economic future is driven by homegrown ingenuity.

The next prime minister’s growth strategy must embrace the reality of a world driven by intangibles, where more than 90 per cent of the S&P 500′s total value is tied to assets like data, algorithms, AI and cloud computing. Intellectual property (IP) and data are today’s most critical business assets, and machine learning is a transformative, general-purpose technology quickly reshaping all sectors. Canada missed the shift to an intangibles economy by failing to prioritize the creation and ownership of valuable IP, costing the economy billions annually. While countries like China and the U.S. secured their leadership in AI patents, Canada’s performance in this area has been in relative decline. Reversing this trend must be central to any credible economic plan…

Finally, prioritizing the global growth of Canadian firms and adopting sectoral strategies to develop dual-use, value-added products and services is critical to securing a prosperous economic future. Our next prime minister should understand these factors, and use them to fashion a new and compelling economic vision.”

So far, this election campaign has been depressing because of a lack of vision, particularly a lack of policy proposals where the Conservatives show a willingness to look beyond resource exports and tax cuts towards jobs that are located in urban areas where the population has grown and is expected to continuing growing.

Meanwhile, Carney is ignoring his background in economics, is not talking about reversing the high immigration policy beloved by big business, and is offering massive housing programs that are based on loans or possibly massive subsidies to make housing “affordable”. Despite Carney being tied to the World Economic Forum (WEF) and no doubt understanding the key role of knowledge and innovation, he seems to not be talking about AI, robotics, or to how make Canada competitive in emerging industries or ones that will sustain the high population growth he seems to accept instead of questioning. Nor do any of the other parties seem to be talking about forward-looking economic strategies, though the polls show that the Greens, NDP, and Bloc are losing votes to the Liberals and are not getting the same level of coverage.

Kim Campbell lost the 1993 election in part because it was reported that she had said “an election is no time to discuss serious issues”. In 2025, the election is about serious issues, but the issues do not seem to be being discussed seriously. There is no departure from the party norms. The Conservatives keep pushing natural resource exports as the source of wealth. The Liberals are continuing with their ruinous policy of high immigration, and are mainly looking at spending money to deal with the impacts instead of addressing the root cause. Both parties offer tax breaks to pander to voters who feel that their standard of living is not keeping up with the cost of living, and that their kids will likely be worse off.

Tweedledum and Tweedledee were two characters from Lewis Carroll’s “Through the Looking Glass” who are identical except that they are exact left-right reversals of each other. We have something like that with Canada’s Liberal and Conservatives, at least to the extent that both are stuck in the past and drawing on the same traditions. These approaches are not how countries like Japan, South Korea, or even the small island of Taiwan had remarkable success in developing and raising their GDP/capita over the last 75 years.

I am reminded of the movie “Dumb and Dumber”. I was never sure which of the idiots played in the movie was which. That is also true of the current election, with both major parties failing to address how to make Canada more competitive with the US, Europe, and China. Instead, they are sticking to the traditional pillars of Canadian economic strategy from the past instead of addressing how Canada can compete in high value added industries or use innovation to catch up or surpass the US on GDP/capita as well as being less reliant on the US itself as a market.

So, combine those and we get Tweedledumb and Tweedledumber, I guess.

Relying on natural resources or immigration are both dumb policies in a world where tech billionaires are worth more than many small countries. Canada lost its advantages in high technology despite having a big head start, and despite having people with the education or skills who could have made us competitive and wealthier as a nation if we had had our own corporations competing with the ones in California, Taiwan, and China.