If you’re a true-blue free-market conservative, this moment could not have been better engineered to make your head explode.
At some point before Dec. 10, Prime Minister Stephen Harper and his cabinet will have to choose between less-free markets or more government involvement in the economy. Mr. Harper will have to decide whether Ottawa will accept or reject two foreign purchases of Canadian petroleum companies, Nexen Inc. and Progress Energy Resources Corp.
This will be a test of the long-accepted principle, articulated by Brian Mulroney in 1985 and broadly accepted by all Canadian governments since, that “Canada is open for business” and welcomes foreign investment.
In the three decades since, Industry Canada has received 1,664 applications for foreign takeovers of Canadian companies, leading to a foreign-ownership stake of $915-billion. So far, it has formally rejected only one.
What complicates things is that the buyers in the Nexen and Progress Energy cases are state-owned corporations: China’s giant oil company CNOOC, and Malaysia’s Petronas.
So it will also be a test of another three-decade-old principle: that Canada doesn’t want the state to have a major ownership stake in the economy. We tried that in the postwar decades, with Canadian state-owned corporations, and it didn’t work out too well, either for the Crown corporations themselves or for private-sector competitors.
Would it be different this time? If Asian governments own a large chunk of the Canadian oil patch, is it really private enterprise? If Ottawa blocks them because they don’t provide a “net benefit” to Canada (as the Investment Canada Act stipulates), and if we start applying that principle more rigidly, will we face protectionist retaliation from other countries? Either way, this will be a political, not an economic, decision, based on a calculation of national interest.
Suddenly, everyone’s an economic nationalist.
Just listen to Preston Manning, the man who, as founder of the movement that became Mr. Harper’s Conservative Party, built his career opposing economic nationalism. “Takeovers by state-owned enterprises, especially those owned by a government whose values are at fundamental variance with our own, should be opposed on principle,” he wrote in The Globe last week. He added, in a phrase that might have been ripped from a Michael Moore film, that “adherence to the principles of citizen-driven democracy means that ultimately any government approval or disapproval … must carry the judgment of the Canadian people.”
Indeed, Mr. Harper himself is beginning to sound like the recording secretary of the Leaside chapter of the Council of Canadians: “We’re determined,” he told reporters on Nov. 3, “to make sure that while we welcome foreign investment that we make sure that it’s in the best interest of this country.”
As it happens, Mr. Harper is probably the most economic nationalist prime minister since Pierre Trudeau. He has blocked more foreign takeovers than anyone since then – beginning with the attempted U.S. buyout of MacDonald, Dettwiler and Associates in 2008, then the Australian attempt at purchasing Potash Corp. in 2010. He has also channelled billions into favoured Canadian corporations through nationalist military-procurement plans and stimulus funds.
This is an interesting historical moment, during which ostensibly free-market leaders – including Barack Obama and David Cameron, as well as Mr. Harper – are spending large sums on preferential treatment for ailing domestic companies (the bailouts of Detroit and the British banking industry, for example) and blocking foreign buyouts.
I don’t think this marks a major Western rejection of globalization or a return to outright protectionism, as some do. Canada remains a hyperglobalized country: That $915-billion in foreign ownership is still smaller than the $941-billion Canadian companies have spent buying foreign firms.
Rather, four years of recession have taught us that there’s no longer a rigid ideological wall between liberal markets and activist government assistance in a free economy. The two are mutually supportive.
Free trade, after all, was invented by the left. For most of Canada’s history, the economic nationalists have been Tories – from John A. Macdonald, with his National Policy, through Arthur Meighen, R.B. Bennett and John Diefenbaker, all of them opposed to the wide-open foreign-investment policies of the Liberals. In this sense, Mr. Harper may well be returning to his party’s grand traditions.