This week’s throne speech characterized boosting economic growth as the Carney government’s “core mission.” There are now reports that early next week, the prime minister will present the provincial premiers with a bold legislative and regulatory plan to streamline and expedite the approvals and permitting processes for major projects.
These positive developments distinguish Carney from his predecessor on rhetoric and substance. The Trudeau government subordinated economic growth to other priorities like equity and fairness and imposed significant policy barriers to private investment in these major projects.
Yet even if these steps on the part of the Carney government are a positive sign, they must be understood as necessary yet insufficient to fulfill the prime minister’s own goal of making Canada the strongest economy in the G7.
That’s in large part due to the scale of Canada’s economic challenges. Our economic malaise is well-documented. Business investment sits 20 percent below 2014 levels. Productivity growth has flatlined. The OECD projects stagnant GDP per capita through 2025 and beyond. This is the legacy of a “lost decade” marked by an inattention to economic growth, poor public policy, and capital flight.
The Carney government rightly diagnoses these problems—but diagnosis alone is insufficient. The test lies in whether its prescriptions are ultimately proportionate to the challenge.
The prime minister’s focus on Canada’s resource sector—particularly plans to streamline approvals for pipelines, nuclear plants, and carbon capture projects—acknowledges a painful truth: capital has been on strike in this critical part of our economy for years. Reforming the Byzantine regulatory regime that discouraged investment is a necessary first step.
Yet even here, there are caveats. Litigation from Indigenous groups and environmental activists could slow progress and undermine the government’s sense of urgency. Internal tensions within the Liberal Party over oil and gas development are a further risk. And of course the government still hasn’t committed to repealing the oil and gas emissions cap or the Impact Assessment Act.
More fundamentally, while natural resources account for a major share of Canadian exports, they represent 19 percent of GDP. A growth agenda confined to this sector is like trying to fuel a modern economy with a single-cylinder engine.
What about the other parts of Canada’s economy? The service sector, which employs nearly 80 percent of workers, barely registers in the government’s rhetoric. The digital economy—where Canada lags peers in innovation and scale—receives scant attention. Small businesses, the backbone of job creation, face a hostile environment of red tape and financing hurdles, evidenced by troubling trends: business exits now outnumber startups for the first time in decades. This silent rebellion by entrepreneurs and investors speaks volumes about the structural barriers stifling growth.
The government’s answer, so far, seems to be an expanded role for the state as a “catalytic” investor. But this approach risks replicating the failures of the past decade. State-directed growth often privileges politically favoured industries or firms over disruptive innovators.
It also ignores a fundamental lesson: Canada’s private sector doesn’t need a government partner—it needs a government that gets out of the way. Lower taxes, regulatory certainty, and competitive capital markets would do more to spur investment than any federal subsidy program.
This isn’t to dismiss the government’s ambition. The rhetorical shift from redistribution to growth is itself significant. So too is the willingness to confront sacred cows like interprovincial trade barriers. But ambition must be matched by scope. A true growth agenda would tackle Canada’s productivity crisis with broad tax reform to incentivize investment in technology and equipment. It would empower entrepreneurs by reducing the bureaucratic burdens that discourage risk-taking and rewards them with more of their hard-won gains. It would, in short, unleash Canada’s “animal spirits.”
The Carney government has set the right goal—but to achieve it, its policies must extend beyond resource development and state-led initiatives. The strongest economy in the G7 won’t be built by government alone. It will require tapping the creativity and dynamism of Canada’s private sector. These are the yardsticks that will measure the success, or failure, of Carney’s economic agenda.
Generative AI assisted in the production of this article, based on an interview done on The Hub’s YouTube channel.
