In 1982, Prime Minister Pierre Trudeau appointed Donald Macdonald to lead an inquiry into Canada's future. The 13-person Royal Commission on the Economic Union and the Development Prospects for Canada ended up recommending that Canada move to an economy more reliant on the free market, competition and price signals. It also called for a free trade agreement with the United States.
To reach its conclusions, the Macdonald Commission sat for three years. Its report, released in 1985, covered three volumes, supported by 72 volumes of research.
The current government's Advisory Council on Economic Growth has 14 members, one more than the royal commission. The similarities end there. This week's release from the council, containing three recommendations for transforming the Canadian economy, is not the product of three years of work. To read it, one would think it had not taken much more than three weeks. In terms of the level of research it is, honestly, thin stuff. And it is largely the rephrasing of policies the Trudeau government has already signalled it wants to pursue.
But thin though it may be, there's still something exhilarating here. The council starts with a goal, and lays out three big ideas to reach it. The goal: doubling Canada's expected level of long-term economic growth. That means raising the median Canadian family's income by an extra $15,000 by 2030.
And the three big ideas put forward in pursuit of the goal are sound – at least in theory. Yes, Canada should mobilize private money to build public infrastructure. We'd likely get a lot more built that way, thereby boosting the country's overall potential economic output.
Yes, Canada should try to attract more foreign investment. If the new funds are successfully turned into productive plant, equipment and infrastructure, that would raise our potential economic output.
And yes, Canada's economic growth is going to be slowed by the aging of the baby boomers. Their impending retirement means that the ratio of retirees per worker is about to skyrocket. One way to counteract that is with a lot of young immigrants.
But all three of these recommendations come with large caveats. They come with details, or rather they should. But the council's short reports are largely silent on the details.
Consider the council's plan to raise immigration to 450,000 a year.
The idea of increasing immigration has political appeal, and the Liberals have been laying the groundwork since they were elected. However, the economic impact will be small – as the growth council's own numbers show. Their 11-page report glosses over the fact that even a near doubling of immigration, to 450,000 a year, will only make a small dent in Canada's rapidly expanding retiree-to-worker ratio. The baby-boom generation is simply that huge.
The Trudeau government wants to make a big splash by boosting immigration. The idea is now its brand. But the economic arguments turn out to be more lukewarm than expected.
Or consider the council's call for greater private involvement in infrastructure. They propose the creation of a national infrastructure bank as a way of using tens of billions of dollars of public money to attract hundreds of billions of private dollars.
In theory, greater privatization of infrastructure makes sense. In theory, there's no reason government needs to build and own bridges, roads, electricity grids or water and sewage systems. Forcing consumers to bear the cost of using, say, a highway is good for both the economy and the environment. In theory, this page is 100 per cent in favour of the idea of greater private sector involvement in all of these areas. We have been for decades.
But the details of how privatization or a public-private partnership is executed are everything – and here, the council's brief report is mute. The details will decide whether the policy is a winner or a bomb. Get them wrong, and it's game over.
Take Ontario's privatization of Highway 407. This toll road, the original section of which is operated by a private developer, could have been the precursor to the privatization and tolling of all of Ontario's highways. It wasn't. The public perception was that the government of the day got fleeced by the guys in three-piece suits. Two decades on, Ontario's 400-series highways are almost entirely publicly owned and toll-free affairs. That's economically illogical. It's bad for the environment to boot. But politically, it's easy to see why the status quo remains. Details, details.
Or consider Ontario's Green Energy Act, which involved using the public purse to incent private electricity developers into producing green power. The province did succeed in "mobilizing private capital," as the phrase goes, and into building all sorts of new electricity infrastructure. But a decade on, the province's electricity system is cracking, costs are out of control, consumers are screaming, and the Dalton McGuinty government's legacy remains under the cloud of gas plants.
The difference between a successful infrastructure-privatization program and a mega-boondoggle, the stuff of billion-dollar losses, subpoenas and ruined political reputations, is nothing but details. The growth council's report on the creation of an infrastructure bank, a privatization program and how to make it all work is a grand total of 16 pages long, including a cover page. It quotes a mere 14 sources, including the Economist magazine and CNBC.com. Basically, it's enough material for an aspirational luncheon speech.
The good news is, it's a pretty good speech. It's pointing in the right direction. And there is a lot of experience worldwide in doing privatizations of public assets and public-private infrastructure partnership where the public benefits at least as much as the private. Canadian pension funds invest in things like roads, ports, bridges and airports around the world; there are few such opportunities in Canada.
The government should move ahead with the council's infrastructure recommendation. But it's going to have to do a lot of hard thinking and heavy lifting first. Avoiding a situation where the public pays and Bay Street benefits is possible. It's just far from automatic.