Sean Speer: Canada’s international irrelevance and the growing importance of housing: Ten things we learned over The Hub’s first year

If Hub readers will indulge me, I thought that I’d mark the one-year anniversary of The Hub’s official launch with a list of ten key things that we’ve learned over the eventful past twelve months. Here it goes (in no particular order): 

1) Notwithstanding our best minds and intentions, we learned that we haven’t yet overcome the basic arithmetic of inflation. The “prime-pumping” that we’ve seen in Canada, the United States, and elsewhere over the past two years or so came with a technocratic arrogance that it could be done without the risk of inflation. It was if academics, bureaucrats, central bankers, and politicians convinced themselves that we were so clever that they could keep their hands perfectly on the dials of fiscal and monetary policy and avoid the inflationary mistakes of the past. 

The U.S. Federal Reserve’s recent announcement that it intends to raise rates several times over the coming months is a powerful sign that they were wrong. That Larry Summers recently speculated there’s a 50-percent chance that the U.S. economy will fall into a recession in the next year portends the costly consequences of their mistake. 

It would be another mistake at this point to claim that one of the inadvertent results is that Modern Monetary Theory is dead. Its underlying ideas not only continue to hold sway in certain progressive circles, but they also tend to resurrect themselves over multi-year and multi-decade cycles. At least in the short term though one gets the sense that these past twelve months have discredited them in the minds of most ordinary citizens. One certainly hopes. 

2) We learned that obituaries to liberalism and growing efforts to define a post-liberal future were premature. While the liberal international order may have been seriously weakened by the Afghanistan and Iraq wars, the global financial crisis, and the West’s policy failures in China, the basic currency of liberal ideas and values have sustained greater appeal than the pessimists assumed. It just took the Ukrainians’ courageous defence of their country and the extraordinary leadership of President Zelenskyy for us to see it. 

Their heroic example and the massive reaction that it has catalysed in the West is, as David Frum said in a recent Hub Dialogue,^{1Episode #19: Dialogue with David Frum: The role of social media in Russia’s invasion of Ukraine} a sign that liberalism’s reservoir of strength may be latent but it’s still capable of manifesting itself in the face of serious threats.

The question for good liberals everywhere is: how do we seize on this moment and ensure that this wave of liberal self-confidence doesn’t quickly wash away? Or, as Ross Douthat recently posited for the New York Times, is it the case that liberalism can only thrive with a “wolf at the door”? The Hub intends to take up these fundamental questions in the coming weeks and months. 

3) Talking about wolves, we got further evidence over the past year that, notwithstanding our best hopes, Starbucks and McDonald’s won’t ultimately bring China into the so-called “global community.” The Chinese government’s ongoing circumspection, denial, and misinformation about COVID-19 aren’t the actions or behaviour of a reliable partner but rather signs that it’s moving in the opposite direction as the country gets richer, more self-assured, and ultimately more belligerent. 

Its ongoing genocide of the country’s Uyghur Muslim population, ambivalent position vis-à-vis Russia’s invasion of Ukraine, and a new round of totalitarian lockdowns in Shanghai are stark reminders that the West’s three-decades-long policy approach of greater economic integration with China has been something of a “spectacular failure.” China is not going to become Japan. 

It isn’t in our interest for the relationship to break down into outright hostility. But we also cannot continue on the same path either, as American defence and security policy expert Elbridge Colby persuasively argued in Hub Dialogues in December and March.^{2“We really need to get back to basics and figure out what it is we’re about. I think our basic goal—and this has had a long strain in American foreign policy thought, but it had become recessed in the last generation in particular—is we need to deny another state the ability to become so powerful that they could intrude into our national life and undermine it.” https://thehub.ca/2021-12-01/elbridge-colby-offers-a-realist-perspective-on-the-rise-of-china/} 

Although it may have been mostly symbolic, the boycott by global leaders (including Prime Minister Trudeau) of this winter’s Beijing Olympics may be a sign that we’re finally learning these lessons. We’re opening our eyes to the real China. It couldn’t come soon enough. Perhaps we’ll eventually look back on 2022 as the year in which the modern equivalent of the “long telegram” found expression. That would be a positive development.   

4) Notwithstanding Justin Trudeau’s big claims in the aftermath of the 2015 federal election that Canada was “back” on the international scene, recent evidence suggests that the world isn’t so sure. 

Canada’s exclusion from a major defence and security agreement between the United States, United Kingdom, and Australia is a powerful example of our ongoing isolation. There are various reasons for our current irrelevance, but the key explanation is our lack of “hard power.” We’ve become a country that mostly talks a good game, as Michael Ignatieff recently noted in a Hub Dialogue.^{3“Part of what we’re doing here is to prove to our allies in NATO and in the United States that we are reliable partners, that we don’t head to the bathroom when the bill comes in, that you can count on a Canadian to do some difficult part. I’ve been saying this for 20 years, not because I’m a warmonger, but because we also want to be a state that is respected in the world. You can’t be respected in the world unless you have some serious lethal capabilities, and we need to develop them and always use them for a peaceful purpose; that is for deterrence, but also to support small countries when they are threatened with authoritarian or totalitarian attack.” https://thehub.ca/2022-03-24/michael-ignatieff-on-loss-and-loneliness-the-trucker-protests-and-ukraines-struggle-for-freedom/}

Yet, for all the talk of a “feminist foreign policy,” the rest of the world still ultimately cares about hard assets—including guns, tanks, and planes—as Germany and others have come to learn in the face of Russia’s invasion of Ukraine. The recent federal budget’s new defence spending—which in light of these world events seems like the bare minimum—is at least a nod that the Canadian government is starting to learn this same lesson. Nice socks are no substitute for a well-equipped military in the realpolitik world of global affairs. 

5) While democracy and representative politics may be imperfect in various ways, we learned that it’s still preferable to the technocracy that we’ve seen in response to recent waves of the pandemic. 

It now seems clear that government reactions to the Omicron variant, particularly in parts of Canada, were overplayed and a cost-benefit analysis of another round of lockdowns—including schools—probably failed to support our policy choices. The long-term costs, as some brave scholars argued at the time, likely outweighed the short-term benefits. 

It raises a broader and oft-neglected point: notwithstanding the significant differences in government responses to the pandemic across jurisdictions, the actual outcomes have converged a great deal.^{4“And yet, looking at the case and death numbers since the coronavirus pandemic began, it’s not obvious which states were cautious and which were not. New York, the original epicenter of the outbreak, has endured the second most deaths per capita behind New Jersey (271 per 100,000). Florida and Texas, despite much criticism of their laissez-faire approaches, rank right in the middle among states (26th and 24th, respectively) in the number of deaths per 100,000 people. California fared only marginally better, sitting at 30th. After a year of debates over mask mandates, lockdowns, and school closures, that mixed evidence might suggest a certain fatalism: Did none of these state policies really matter? Or was the virus going to spread no matter what states did? Was it all for nothing?” https://www.vox.com/coronavirus-covid19/22456544/covid-19-mask-mandates-lockdown-debate-evidence}

This shouldn’t be interpreted as a rejection of expertise but a call to put expertise in its proper place in a democratic society. As David Frum recently put it in an episode of Hub Dialogues: “In the latter part of the COVID-19 pandemic, too much of that deference [by politicians to experts] was a mistake and a mistake that needs to be learned from.”^{5Episode #33: Dialogue with David Frum: Liberal-NDP Agreement & Upcoming Federal Budget} Amen. 

6) In response to the recent spike in consumer prices, one thing that’s been brought into focus is the political economy challenge of combatting climate change by relying on pricing mechanisms. 

Canada’s carbon tax is currently $50 per tonne but it’s set to reach $170 by 2030. That should in theory have a far bigger effect on prices (including gas prices) than anything we’ve seen in recent months. Yet we’ve seen governments in Canada and the United States scramble to reduce fuel taxes and other consumption taxes in recent weeks to try to mitigate rising prices in response to growing political pressure. 

If we can’t sustain the price increases that we’ve seen in recent months, it suggests that, notwithstanding its conceptual appeal, a rising carbon price as a key means of abating emissions is probably not sustainable. Democratic buy-in—particularly among key “swing voters” in car-friendly suburbs—increasingly seems like a less plausible outcome than the rise of our own Yellow Vest movement. 

If that’s true, it tells us that the primary means by which we’ll make climate progress will be less the use of “sticks” in the form of carbon taxes and more the use of “carrots” in the form of major public investments in R&D and subsidies for private firms to commercialize and deploy new technologies at scale. Net-zero emissions, in other words, is going to come from breakthrough technologies rather than higher taxes. 

7) As the Conservative Party kicked off its third leadership race in six years, we learned that the party continues to search for an identity more than seven years after its founding leader, Stephen Harper, officially stepped down. 

Successive leaders lasted for a single election each in large part because they failed to reproduce the formula that enabled the Harper-led Conservatives to reach close to 40 percent of the popular vote in 2008 and 2011. While the party has won the popular vote in successive elections, its vote share was still less than 35 percent in both cases. 

The current leadership race, therefore, is fundamentally about the right message and messenger to expand the party’s support. It pits Pierre Poilievre’s ideological narrative of “freedom” against Jean Charest’s pragmatic message about election appeal. The former seems self-evidently better positioned to win the party’s leadership. The question is whether his impressive support will translate into a general election. The Hub will be following the race closely between now and voting day in early September. 

8) As we’ve discussed on The Hub’s weekly roundtable, there’s something big going on in our country with younger Canadians. We’ve heard from Ipsos Public Affairs CEO Darrell Bricker that there’s a growing agitation that reflects a generational sense that the milestones of middle-class progress are increasingly out of reach. 

The most obvious example is the housing crisis which we’ve written and talked a lot about at The Hub over the past year. The housing market has gone berserk due to a combination of too little supply and irrational exuberance. Aspirations of homeownership in our major cities are now mostly the purview of those with rich parents. 

Another manifestation is delayed family formation and declining fertility. Last year Canadians had the fewest babies in more than two decades. We now seem poised to join a group of countries known as the “lowest low” for our fertility rate of barely 1.4 children per woman. An unwillingness or inability to bring children into the world is an alarming expression of collective pessimism and discontent. 

It’s crucial therefore that policymakers, business leaders, and civil society commit themselves to addressing these issues and restarting middle-class progress. The Hub certainly intends to. 

9) We learned that Howard Anglin’s vocabulary is seemingly infinite, Trevor Tombe is a chart-making machine, Malcolm Jolley knows a lot about wine, Andrew Coyne likes to choose from the philosophical buffet, and George Will is as cool in person as I hoped. We’re enormously grateful for our extraordinary stable of thoughtful and incisive contributors and the brilliant minds who’ve joined us for more than 100 (and counting) Hub Dialogues. 

10) Lastly, the Hub team learned of the goodwill and support from thousands of people whose financial support, subscriptions, and growing readership enabled us to launch in April 2021 and to continue producing commentary and analysis about Canadian public policy and governance. Thank you. We quite literally couldn’t do it without you. If you’d like to join the Hub community and support our mission, you can sign-up for our daily newsletter or donate here.

We look forward to what the coming year brings. If the past twelve months are any indication, it’s bound to be quite a ride. We hope that you’ll continue to join us for it.