Craig Alexander is a contributing columnist for The Globe and Mail. He has served as chief economist at Deloitte Canada, the Conference Board of Canada and Toronto-Dominion Bank.
To illustrate, economist John Lester published a report in March showing that Canadian federal business subsidies rose 140 per cent over the past nine years, compared with just 17 per cent over the preceding nine years. This reflects the Trudeau government’s belief in the power of government to drive outcomes. In some cases, the expansion of industrial policy has been warranted to address market failures, such as measures aimed at reducing inequality and addressing climate change.
Matthew Boswell, Commissioner at the Competition Bureau, reinforced this message in these pages and highlighted that his group’s research showed that the competitive intensity in the Canadian economy fell between 2000 and 2020. He wrote: “Too often in Canada, laws, policies and regulations create barriers – which are outdated and no longer serve the public interest – to competition.”
The preference for greater industrial policy in recent years also overlooks its inherent limitations. Governments do not have the information or the ability to predict which industry or firm will be the next global leader or will generate the greatest prosperity for its citizens. The myriad of price distortions created by the vastly increased number of industrial policy measures makes it hard to assess whether individual incentives, subsidies and regulation are having the desired effect.