In an alternate universe, you would know Chrystia Freeland only as a writer and journalist, as an eminent authority on Vladimir Putin and the oligarchs who feed off him, perhaps eventually as the editor-in-chief of this newspaper or the Financial Times. You would see her on talk shows, on the lecture circuit, publishing another award-winning book examining the ways of wealth and power. That was the train she was on in 2013, when she decided to jump the track and enter national politics. Since being elected in 2015, she’s become known as Justin Trudeau’s Everything Minister, his one sure bet, parachuted into critical jobs at crucial junctures—minister of international trade, of foreign affairs, of intergovernmental affairs, deputy prime minister and, lately, minister of finance. In every job, she has delivered. Her next assignment is a federal budget that will carve a path forward for a nation facing multiple challenges. She spoke to us via Zoom from Ottawa, in front of a quartet of Canadian flags. Frequently during the hour, Freeland would lean forward to make a point, toward her computer’s webcam, and strike the surface in front of her, the rattling of pens becoming the sound of her certainty.
You’ve been Finance Minister for a year and a half. It’s been a pretty challenging time for the economy. What’s working right now?
Broadly, Canadians have done a remarkable job dealing with COVID-19 and the recession. I will take you back to when COVID first hit and we had those immediate lockdowns. That was the worst economic experience for Canada since the Great Depression—17% drop in GDP. Three million people lost their jobs. That is just a huge, devastating blow. And as we are speaking at the end of January, 108% of jobs recovered. Jobs recovery in Canada is the strongest, as of this moment, in the G7. (1) GDP, as of this minute, is almost fully recovered. And even that doesn’t tell the full story, because Canadian households, on average, have more savings and less debt than they had before the pandemic struck. Canadian small business has been remarkably resilient. As of this minute, the number of bankruptcies are lower than before the pandemic, and there are more active businesses today than before the pandemic.
Inflation is higher than it has been in 30 years, at 4.8%. How does that match up with your expectations?
I am very focused on affordability for Canadian families. And I know that is challenging for a lot of people right now. This is clearly a global phenomenon. And actually, inflation, while elevated in Canada, is lower than in many of our peer countries—the U.S., 7%. The U.K. is higher than Canada, Germany is higher than Canada. So, there are some global pressures bearing down on us. Things like supply chain. Things like energy prices. I will also say I have a great deal of confidence, as should all Canadians, in the Bank of Canada. We thought very carefully and worked closely with the Bank on its mandate renewal and were very clear about the pre-eminent focus on the inflation target. So, people should be really confident, as I am, that the Bank will do its job. When it comes to affordability, we are making investments to help with that challenge. I’ll point to childcare. Fees are going to come down by 50% this year for a lot of families.
Since 2019, the federal deficit has gone from 1% of GDP to 15%. Has there been a sea change in how governments consider the notion of debt and deficit?
The extraordinary investments the federal government made when COVID hit to keep the economy going are, I think, fully justified when you see the results. (2) Going forward, our government remains committed to a declining debt-to-GDP ratio, as we were before the pandemic hit. I do believe government has a role to make investments for the long term that can increase the economic capacity of the country, and to run deficits to do it. In the green transition, for example. Those are investments that pay off.
You mentioned concerns around affordability. That is a real issue in housing. It’s pretty obvious Canada is in a prolonged and extreme housing bubble. So—
I am not so sure I would agree with that characterization, Trevor. But carry on.
The U.S. housing market corrected with the 2008-09 crisis. Canada’s market never did. Now many Canadians are struggling to participate in home ownership. You’re suggesting you don’t see the problem the way I do. What’s your view?
I would urge us, as I do on many issues, not to do something which is all too easy for Canadians to do, which is to think we’re Americans. We live in the same media space. We speak their language, as it were, and it can be easy to think their problems are our problems.
But our problem is much greater than in the U.S.
Well, the structure of the Canadian economy and Canadian society are very different, and that includes housing. Our banking system, and the way our banking system approaches risk, is very different. Another really important difference is that Canada has the fastest growing population in the G7. Having said that, the core of your question I absolutely accept. People need to be able to afford homes for our economy and our society to continue to grow and flourish. So, I absolutely see housing as one of the core issues we’re looking at as we go into the budget. I do think supply is at the heart of the challenge. (3) We need to build homes for a growing country.
The supply issue is not just in houses to buy, but also homes to rent. Even those aren’t being built.
I totally agree. The federal government has an important role to play, working with municipalities and provinces, in increasing supply, including a mix of rental supply. I think now is the time for new energy in the building of co-ops. We also need to do things in terms of the financialization of housing. We need to see housing as homes for Canadian families and not a financial asset. I want to be very clear that our government has absolutely no intention of altering the position on capital gains on the principal residence of Canadians. That is a very important part of how Canadian society works. Where we need to be thoughtful is in foreign money flowing into Canadian housing and turning that into a financial asset. That’s not what Canadian houses are meant to be for.
Regarding capital gains tax: You’re not going to change how it affects principal residences. What about the equity markets?
No intention to go there.
Can I say one more thing about our economic thinking?
I really feel now that what Canada needs is a very positive, optimistic growth agenda. We need it because we all know that we have ahead of us the green transition, which is going to be really challenging. (4) So there is an imperative to deliver growth. The starting blocks are the kinds of social infrastructure policies we are really going to be driving. Things like early learning and childcare, the Canada workers benefit, investments in education, in housing, in an immigration policy which allows us to grow the labour force. I really see this suite of measures as a very powerful pro-growth agenda, which Canada, I think, is uniquely positioned to enact. Because we’re a country that is able to embrace immigrants, because we are a country that is still a society that works and believes in investing in people.
Let’s move beyond Canada. How would you characterize our relationship with the Biden administration in the U.S.?
I would characterize it as very good.
Should we be happy the Build Back Better bill didn’t get passed? That was going to hurt our EV industry.
Well, the Build Back Better bill is a question for the United States. I believe they are still debating it. When it comes to EV incentives, that is something we have been very focused on. I’ve been working with Brian Deese (5) and with Treasury Secretary Janet Yellen. The Americans absolutely do understand that any protectionist action that runs contrary to NAFTA (6) is something Canada would respond to forcefully. Our approach there is, hope for the best, prepare for the worst.
Is that your approach to growing political instability in the U.S.?
Again, that characterization of the U.S. was yours and not mine, Trevor. I think Canada needs to work very hard to have an effective relationship with the U.S. administration, no matter who is in office. But also with the legislature, on both sides of the aisle, and with people in state houses and with mayors. We need to be working with U.S. unions and U.S. business.
What’s to be done regarding our increasingly troubled relationship with China?
Well, let me first say how happy I am that Michael Spavor and Michael Kovrig are home. As foreign minister, I got to know their families. I think all Canadians felt their pain and the dignity and courage with which they conducted themselves.
Can we keep it on an economic level?
A hundred percent, Trevor. Although the arbitrary detention of Michael Kovrig and Michael Spavor is a fact and a reality that all Canadians should bear in mind in our ongoing relationship with China. That’s why I started there. I think we need to be very clear-eyed about the challenges China poses to Canada, to the world and to its own people, including the Uyghurs. We need to remember that China does not hesitate to throw its weight around, particularly dealing with a middle power like us. And we need to be very thoughtful about the human rights issues in China. It is also a huge force in the global economy. China is a very important actor, therefore, when it comes to climate change, which is the pre-eminent existential issue for human beings. So, we need to be prepared to stand up to China.
Your government is discussing an investment deal with Taiwan. How do you anticipate China will react?
I learned, in the NAFTA negotiations, not to answer hypotheticals and also to leave others to answer questions about their own actions.
Does the increasing isolationism we’re seeing in other parts of the world suggest Canada should strive to make its economy more self-sufficient?
I wouldn’t necessarily describe what we’re seeing always as isolation. What I think we are seeing is protectionism, maybe neomercantilism—a kind of reversion to a 19th-century-type world of great powers and big trading blocs trying to throw their weight around. In that kind of world, Canada needs to be smart. It is a very different world from the one we’re accustomed to, either with Pax Britannia or Pax Americana. I think we have to do three things: We have to continue to build an alliance of like-minded democracies. We have to think about what our economic vulnerabilities are, and that does mean we need to think about resilience in supply chains. We learned that during COVID, trying to buy things like PPE, vaccines and so forth. And we need to think about it in areas like batteries for EVs, semiconductors and solar panels. That work is happening. Finally, we need to have a strong defensive game. Take out those insurance policies, invest in resilience, try to look around corners. But I think there are some real opportunities for Canada, as well: critical minerals and metals, the whole EV supply chain. We have the capacity to be a really key player.
Is there a danger that Canada remains a resource economy, if you’re focusing on what’s coming out of the ground?
First of all, I don’t believe in talking down natural resources. Canada is fortunate to be richly endowed. That’s a strength to build on. Second, when I talk about a critical minerals and metals strategy, I think about it in terms of something that starts with what we have in the ground and looks to build something that goes all the way up the supply chain to a finished car. And by the way, we do manufacture cars in Canada, too.
At least for now.
Oh, we’re gonna continue. And I know you know this, but it’s perhaps less known than it should be: We are becoming a real technology hotspot. Toronto, Vancouver, Montreal—these are places that are seeing stronger growth in the tech sector than Silicon Valley. We are creating jobs, and we are creating companies. I see the export of Canadian services as a real area of growth. A politician I look back to is Sir Clifford Sifton, maybe because I grew up on the Prairies. He thought about Canadian growth as people plus railways plus land equals a growing Canada. For me, it is people plus homes plus education—I would add early learning and childcare as part of that—equals a growing Canada. With Sifton, it was a quarter-section. (7) With some new Canadians, it’s gonna be a tech company. That’s a reality.
Speaking of childcare, you’re a working mom with three kids at home. How have you managed over the past couple of years?
Much more easily than anyone working in a long-term care facility or a hospital or a grocery store, or any of those really hard jobs so many people have been doing. Having said that, I bet I have loaded more dishwashers than any Finance Minister in Canadian history, hitherto. And that does give you some perspective on the challenges working mothers face. And for sure, I have been really focused on making life easier for working parents, especially mothers. I want them to be able to fully contribute, and I want young women not to feel like they have to make a choice between being a mother and having a great job or going to school. You can do both.
You had a very heady career as a journalist and writer in front of you, and you chose to go into politics. Why?
My dad told me I had to. My dad and my husband. (8) I grew up in Alberta in the age of the Alberta Heritage Trust Fund, which provided generous scholarships. And I got a whole bunch of them. My dad said to me, “Canada has invested a lot in you. You might win, you might lose. But you owe it to Canada to give it a try.”
1. According to government figures, as of Dec. 14, 2021, Canada had recouped 106% of jobs lost in the pandemic, compared to 83% for the U.S.
2. The Economist ranked Canada’s economic performance 10th among OECD countries during the pandemic, tied with Australia and one spot behind the U.S.
3. Freeland referred to research published by Scotiabank in May 2021 showing Canada has the lowest number of housing units per 1,000 residents of any G7 country.
4. Freeland mentioned a report from the Office of the Superintendent of Financial Institutions and the Bank of Canada. Published in mid-January, it said, among other things, that income for oil and gas companies could fall by 80% by 2050, while their probability of debt default could rise by some 200%.
5. Deese is director of the National Economic Council and an authoritative voice on the U.S. auto industry.
6. Technically the new deal is called the U.S.-Mexico-Canada Agreement, or USMCA, which Freeland negotiated. But the name hasn’t caught on in Canada.
7. In an effort to populate and develop Western Canada, the Dominion Lands Act of 1872 allowed individuals and companies to obtain land grants of a “quarter-section,” or 65 hectares. (It should be noted that treaties with First Nations peoples required them to surrender their land to the Crown.)
8. Freeland’s father, Donald, was a farmer and lawyer. Her husband, Graham Bowley, is a British New York Times reporter.
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