Sean Speer: Been there, done that: Economic nationalism is a dead end  

Last weekend in The Hub, I argued that Canadian Conservatives (and conservatives) should resist the siren song of economic nationalism and instead double down on free markets and free trade.

Former Conservative MP Ryan Williams (whose heterodox ideas and thinking I specifically cited) responded with an essay of his own that outlined the case for an alternative to free-market economics that he calls “strategic competitiveness.” He insists that his conception of political economy isn’t protectionism or statism per se, but rather about “restoring sovereignty in an increasingly strategic globalized economy.”

As I first wrote, his position is paradoxical. On one hand, he rejects neoliberalism and the free-trade model of recent decades. He instead argues for a more activist economic agenda for different reasons, including that Canada cannot “stay hands-off while other countries go strategic.”

Yet, on the other hand, he calls himself pro-market, disavows protectionism, and says his aim is mostly to remove barriers to competitiveness. Whether intentional or not, the net effect is to obscure what he’s really calling for.

Williams presents his notion of “strategic competitiveness” (which is never quite defined) in juxtaposition to “blind [economic] openness.” He’s also previously written against “free trade dogma” and in favour of so-called “smart economics.”

Notwithstanding the inherent vagueness of these phrases, if one is to take the totality of Williams’s ideas seriously, it’s reasonable to conclude that he’s urging Conservatives to adopt a version of economic nationalism. The logic may be somewhat different from left-wing economic nationalism, but the basic ideas are the same: the government should use its policy tools to engineer a particular set of market outcomes in the name of “Canada First.”

I should acknowledge here that in previous years I’ve nodded at times in some of these directions myself—especially on the need for a more coherent science and technology strategy. But I’ve since retreated to my old neoliberalism for two main reasons.

First, the secular challenges facing Canada’s economy—including economic stagnation, low business investment, and poor productivity—actually call out for more economic liberalization rather than less.

Second, the Trudeau era has been a bracing reminder of the inherent limits of state action. Nothing over the past decade has given one any confidence that a government that struggles to carry out its basic duties is capable of micromanaging the economy.

If Williams’s essential argument boils down to the idea that Conservatives would simply be smarter or more strategic in their state interventions than the Liberals, then he must reckon with the prevailing likelihood that whatever it is he’s calling for is still bound to fail along Public Choice lines. So-called “strategic competitiveness” is neither likely to be strategic nor competitive.

Canada has previously been down this road. Harry Johnson, the late Canadian economist, famously characterized the country’s last experiment with economic nationalism in the 1960s and 1970s as “diverting Canada into a narrow and garbage-cluttered cul-de-sac.” It produced huge distortions and inefficiencies and eventually collapsed under the weight of its own internal contradictions. There’s no reason to think that the outcome would be different this time, just because Williams is a conservative and dresses it up as “smart economics.”

There’s also a major dissonance between his characterization of federal economic policy as one of “blind openness” and the far more interventionist record. Canada is hardly a laissez-faire economy. Government already occupies a large share of GDP, and much of our industrial structure is shaped by protections, subsidies, and regulatory moats—from autos to utilities and various other sectors in between. Regulatory sclerosis slows down projects in every sector. Interprovincial trade barriers fragment our domestic market. The idea that we’ve been too open to markets is simply wrong.

To the extent that Williams calls for removing these policy-induced impediments, I agree with him. If his argument is to free up our economy and let domestic firms compete, then we’re on the same side. But when “removing self-inflicted costs” is paired with “protection,” “shields,” and other interventionist ideas, we’re indeed drifting back into the failed thinking of economic nationalism.

It’s possible that this is merely a case of imprecise and misinterpretable language. Williams insists, for instance, that his own interpretation of “protection” isn’t the typical economic definition but is instead just about removing competitiveness barriers. His distinction between “strategic competitiveness” and “open blindness” is also unclear—particularly since his overall formulation that Canada should “produce what we do best and trade for the rest” is standard-fare classical economics.

Yet his claims about the death of neoliberalism and the need to “go strategic” are a tell that his real project is about more than market-enabling reforms. They point to a belief that government should take an active hand in shaping the structure of the economy, including identifying preferred sectors and directing resources toward them.

That’s the essence of economic nationalism, however much it may be dressed in the language of competitiveness and sovereignty. It’s a shift away from markets as the primary allocator of capital and toward the state as the chief architect of economic outcomes.

That would undoubtedly be a bad development for Canada’s economy. It would exacerbate the country’s economic malaise by subordinating market dynamism in favour of a system of domestic preferences. Our economy would become more politicized, and Canadians would become poorer over time.

But it would also be bad for Canadian conservatism. For the past 40 years, Canadian Conservatives have been imperfect yet broadly reliable as the country’s main champions for economic liberalism. A right-wing shift to economic nationalism would effectively leave us with no mainstream political voices for free markets and free trade. Canadians’ political choices would amount to competing versions of statism.

There’s no doubt that Williams is grappling with real shifts in Canada’s political economy. But the version of economic nationalism he’s pointing toward, even if it’s wrapped in pro-market rhetoric, risks taking us back to the garbage-cluttered cul-de-sac that we worked so hard to leave.