The chair of the Alberta Investment Management Corporation is calling on the federal government to transition its spending away from social programs and into efficient economic stimulus that can directly steer the country towards growth in order to begin the economic rehabilitation from COVID-19.
Mark Wiseman said he expects Justin Trudeau’s Liberal government will deliver a clear and unambiguous growth strategy in its Throne Speech this coming week, one to which the government will be accountable.
Ottawa is projecting a federal deficit of $343.2 billion through the rest of the year. While that number is already historic, Wiseman, who is the former chief executive of the Canada Pension Plan Investment Board, said that history has already proven that the best way to get out of a recession is to spend your way out.
The key, he said, is to ensure that deficit spending is done on programs that can immediately put GDP on a higher growth trajectory than it was pre-COVID 19 so the country can “grow out of the debt.” Social programs such the Canada Emergency Response Benefit, which Wiseman referred to as a “blunt force instrument,” are no longer a solution for a government that not only has to spend big but also spend efficiently, he said.
“We need to spend because the pandemic has put us in that situation,” Wiseman said. “There’s no other option. We need to make sure every dollar we spend is shifted to growth and rehabilitation. If you can spend the money and create the growth from it, you grow your way out of the problem.”
Wiseman outlined three areas Canada can invest in that could put it on a higher growth trajectory: infrastructure, natural resources and technology.
For us to stand up and say we're no longer going to produce oil — that's not an option
The first is often looked at a classic strategy to stimulate the economy after the success that similar projects had in Franklin D. Roosevelt’s New Deal, which was responsible for steering the U.S. back toward growth after the Great Depression. He points to the St. Lawrence Seaway as an example. It stimulated growth when it was being built because of the jobs created and it’s still stimulating growth now by facilitating trade. Similar projects focused around public transit or communication infrastructure could have the same effect, he said. The issue with this form of stimulus is that it often takes years for government to agree on projects and even more time for shovels to go in the ground.
When Wiseman brings up taking action on natural resources, he means completing pipelines, particularly the $12.6 billion Trans Mountain expansion. Enbridge’s Line 3 replacement, which is supposed to be completed by the end of the year is also being built. Keystone XL, meanwhile, is expected to be complete by 2023.
Of course, AIMCo would stand to benefit greatly from the completion of pipelines due to the fact that it invests heavily into Alberta’s oil and gas sector and for years, analysts have pointed to pipelines being the key to unlock value there.
A renewed focus on pipelines would also certainly clash with the Liberals’ climate-friendly approach and perhaps even dissuade some of the party’s voters, but with Alberta struggling in the manner that it currently is, Wiseman said the country has no choice.
“For us to stand up and say we’re no longer going to produce oil — that’s not an option,” said Wiseman, who said that transporting crude in pipelines is more efficient and environmentally friendly than doing so by rail. “That wasn’t an option before COVID and it’s not an option in a post-COVID world.”
As far as investing in the tech sector goes, Wiseman would like to see the government create the conditions for startups and SMEs to thrive over the next few years while directly investing in areas where Canada is already strong, primarily IT, agra-tech and clean energy.
“The government isn’t going to create the next Shopify, but it can help create the conditions where the next 10 flourish in this country,” he said.
Investing more in human resources is another solution, Wiseman said, suggesting that Canada broaden its immigration targets to about 500,000 per year. In comparison, the pre-COVID target for 2020 was 341,000.
Canada needs an abundance of both skilled and unskilled workers, he argued, pointing to how much of Canadian economic growth since the Second World War has been attributed to immigration and population increases. The tech sector could immediately benefit if Canada begins to target skilled workers who have cooled on the United States as a potential destination.
And in a move that would send Canadians back to work, Wiseman is pushing for a national childcare strategy. It may sound like a social program, but he views it as economic. Childcare, including earth childhood education is almost prohibitive for many Canadians due to the extremely high costs associated with it, particularly in Ontario where daycare can easily cost parents more than $20,000 per year.
Making childcare affordable would free up parents to return to the workforce and generate more wages which would then be turned into consumer dollars.
All of this is to say that the government simply cannot just wait for a vaccine, which he suspects will only provide a short-term boost and not solve the country’s growth issues going forward.
“We’ve created this big hole and the only way to fill that hole is through growth,” he said. “Or we’re going to cripple a generation of Canadians.”
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