Carneyomics and the cost of Donald Trump’s war

Economist Jim Stanford discusses the cost of Trump’s Iran War to Canadians and Mark Carney’s economic agenda. Jim estimates the direct economic cost of high fuel prices will reach $50 billion and go higher if it  prompts the Bank of Canada to raise interest rates to reduce inflation. Jim also explores the investment banker vision of Mark Carney and concerns that his proposed “sovereign wealth fund” will be a mechanism for privatizing airports, ports and other public infrastructure.

Nikki looks at the series of federal-provincial deals from the Build Canada fund but questions why Nova Scotia seems to have no plan in the works to get federal assistance for provincial priorities.

Tom digs into some new data showing the sales margin for food and fuel retailers is growing at twice the rate of inflation, pouring money into the accounts of food billionaires like the Weston family, who are now using their wealth to fund a new media platform. 

Transcript

Welcome!

Nikki Hill 0:26

Welcome to Left East to West with me, Nikki Hill.

Tom Parkin 0:29

And me, Tom Parkin, and my head is reeling a bit, Nikki. I'm watching all these things go on. Canada's headed towards a Trump-imposed deadline on Kuzma. Mark Carney is saying ingratiating things about this attack on Iran being worth it and then a game changer. Got a G7 meeting where Trump told the media and the other six beside him that I'm the boss. And he's talking about trying to control, trying to maintain uh US control of AI. Um there's just so much of a feeling from for me right now, like everybody's under this guy's thumb. And uh can we can we get out from under it? Is there a path um towards a country that you know where we feel like economically strong and secure and not under this guy's rule? So we have a great guest here today to help us think about restoring real economic progress for people, getting incomes ahead of prices for change.

Nikki Hill 1:34

Yeah, we do. It's great. And I think it's one of the first people we wanted to be on the show when we started back in January, and he's a busy person. So we're happy to get Jim Stanford, who's an economist and was a is a director at the Center for Future Work here in Vancouver, was a longtime teeth economist and policy director for Unifor, the Union, and he has some really great insights and analysis on some of the challenges that we're facing as a country and as a world right now. And that's not the end of our great upcoming interviews. Just because we're heading into summer doesn't mean these uh people are not joining us on the show. So we have interviews coming up with Merritt Styles, we have Carla Beck in the next couple of weeks, and then we also have Jared Walker, who's executive director at Canadians for Tax Fairness. So, whatever podcast player you're listening on, make sure you're tapping that follow so you're getting alerts when our new episodes come out each week. But first, we're gonna have Jim Stanford coming up after we do this week Below the Fold, talking a couple of important news stories that didn't make national headlines.

Nikki: Why isn't Nova Scotia trying to get federal funds?

Tom Parkin 2:47

Nikki, BC had a lot of activity with a prime minister in town last week and the World Cup games. But also in an incredible uh six goal victory, like everybody went bananas about that was fantastic. But anyway, um apparently you also had yeah, talk about that. But also uh uh a big um some big announcements around housing and infrastructure. Um but you uh in in BC, but you also wanted to touch on some some of how the same politic plays or not, doesn't play, I guess, in Nova Scotia.

Nikki Hill 3:20

We had Nova Scotia NDP leader Claudia Chender on the show a couple of months ago. And she was talking specifically about some of the money that the Houston government's leaving on the table from the federal government. We were talking about pharmacare in particular, the impact that's having on affordability issues for Nova Scotians, as they can see at the same time. Provinces like BC, Manitoba are leveraging those dollars for popular health care needs that, of course, are taking, keeping money in people's pockets, like contraception, diabetes medication, menopause treatments, and more. I think BC also was able to come out this week on on some of their planning around uh hearing devices. So I think, you know, things that people have to go out of pocket to pay for using the dollars that you can get from the Fed. So she's also raised similar concerns recently that the Houston government is again failing to access the funds the federal government's put on the table for provinces, like the $366 million through the Build Canada Strong Fund, which could actually be used for housing, which I think, you know, across the country, important, post-secondary education capital infrastructure, also important. And then the Canada Public Transit Fund, which has funds for over 10 years for public transit infrastructure. So it's one of those things, I think, again, you know, where we're seeing some governments lean in to these partnerships and some lean pretty far out, which as we see these affordability crises continue across the country, um, you know, is probably impacting them somewhat in public opinion polling as well. I think we're seeing that more and more. Uh, we did see Quebec and Ontario jump on their deals, though, with Ottawa pretty early. Uh, Ontario was back in March. That was a $3.8 billion deal, which gave them the first partnership with the federal government on the Build Community Strong Fund. And then, of course, that sets some benchmarks for other provinces to work from, including BC. So uh BC, as you said, lots of activity here last week. The prime minister was in town for the big announcement with Premier EB on their version of this partnership on June 18th. That was a federal investment of more than $5 billion over 10 years for BC's local infrastructure. Uh, they also did some meetings after, um, so obviously lots to talk about between the prime minister and premier EB when we're looking at things like Alberta's MOU and the path forward for BC on similar partnerships there. But then of course, as we said, the uh we had the World Cup game here and lots of time for politicians to uh attend that and dig into the celebrations because that's been taking over Vancouver as well as other cities. But on that deal, so where the BC agreement leaned into, because these are different agreements based on jurisdictional needs, was a reduction in municipal development charges on multi-unit housing of up to 50% for three years. So those are some big fundings there per unit through Build Community Strong. But also what something that's getting a lot of chatter is a new partnership between the two levels of government on a condo conversion. So using Build Canada Homes financing to turn some of the vacant condo units into affordable homes. So, you know, details pending on how they plan to do that. And then $2.5 billion, much needed here on infrastructure projects. There's a number of projects that are in high demand and agreed to between province, municipalities, federal government, including here the Surrey to Langley Sky Train extension. And then money from both for uh healthcare infrastructure, of course, really needed, community infrastructure. And then I think importantly, um to remember that we had the tragedy in Tumblr Ridge in February. So both this agreement included $100 million from each level of government to get the Tumblr Ridge people a new secondary school and then a modernized healthcare center. So starting right away on construction. So, you know, we are seeing this uh provincial flavor to each of these agreements. So, in that vein, you know, Claudia Chender back in the Nova Scotia NDP leader frame calling on Premier Houston to help Nova Scotians with some of the affordability issues that they're facing by getting deals underway. So specifically looking at programs keeping affordable apartments, expanding rapid transit and ferry service, focusing in on the needs around the Halifax regional municipality as well, where there's there's opportunities. And also looking at where some of these uh funding opportunities could address issues that they're seeing be exacerbated in in Halifax in particular. So we're seeing there, no matter the fact that there is a housing plan in place, homelessness really rising in the Halifax region in the past few years, even since the government has brought in a housing plan. So again, how do you get some of these other tools in the toolbox to be applied to help out people when they they need it most, but also planning. So, you know, the Nova Scotia government's response to all of this is that their five-year housing plan, which I think is is that three years ago into it, is starting to have an impact. But housing experts in the province are also saying that it's actually high-end rentals coming online where there's a high vacancy rate for or a low vacancy rate for lower cost apartments, which is, you know, again, how you should be using all the tools in the toolbox. And I think not a not an uncommon trend we're seeing. But um, you know, if that's your housing plan and you're not gonna go dig into where other opportunities lay, you can see where the public's gonna have some concern and also push into the affordable and public housing needs there. I think, you know, it's worth noting because we've talked about it uh recently as well, is Houston is one of the premiers finding himself down in the polls and later premier, latest premier standing, which is Angus Reed Institute, uh, to give them some credit. And then also we had James Valkyrie on the show from Viewpoints Research, who recently shared data from a poll they did that showed that 60% of Nova Scotians think Houston and the PCs are on the wrong track. So I think, you know, as you start to see these trends and your your province not engaging and getting that investment from the federal government continues to be a theme for you. You also then lean into that narrative of not acting for Nova Scotians at a time when people feel these pressures.

Tom Parkin 9:37

Yeah. It it's kind of odd, right? Because, you know, a lot of people in, you know, your part of the country, my part of the country think, oh, well, housing prices are going down, we're still having the condo crash and all this kind of stuff. That's not what's going on in Halifax. House prices and rents are are at new highs and uh they're just in a different market space. And I can't, uh it just kind of strikes me as very strange um that given that context, um, and given the fallen support in the polls, that like why is Tim Houston not trying to uh figure out some policy levers that he can get Mr. Kearney to help him with to address the major electoral problem that he's facing uh in a in a market crisis that's building. I what do you think, Mickey? Just seems odd to me.

Nikki Hill 10:26

Yeah, I agree. And I think we're gonna you know continue to see uh the the narrative burn that gives a great space for an opposition leader to conquest into so uh and who knows, maybe there's secret deals and negotiations going on behind the scenes. Certainly in BC, the housing minister and the premier have been really upfront that they were in these negotiations with the federal government. So one would think if you were actually trying to bring the investments into the province that you'd be saying that too.

Tom Parkin 10:54

Crowing about it a bit anyway, right?

Nikki Hill 10:55

A little bit. Yeah, other jurisdictions are showing you you can before it's signed. We saw some data out late last week

Tom: Fast-growing sales margins at grocery and gas retailers

Nikki Hill 11:03

about quickly growing grocery and gas retail sales margins. It seemed to have slipped well below the fold, but you're covering it.

Tom Parkin 11:11

Yeah, okay. Well, yes, on Thursday, uh a release of updated info from Statistics Canada gave a pretty clear indication that the food and fuel price inflation we're feeling is being considerably driven by a rapid increase in sales margins. What, in other words, what some economists call sellers inflation. So StackCAN does this retail service price index every month. It measures the difference between the prices retailers pay to wholesalers and the prices they charge to you and me at the store. So that's the sales margin. Uh and the data showed that since uh 2020, January 2020, the sales margin index for all retailers, not just food, for just generally in retail, was up about 22% in that period, which is not far off the general mark of inflation, which kind of makes sense because that's where that's where we get inflation at the store. Um but in the same period, the sales margin for gas retailers went up 43%, twice as fast.

unknown 12:11

Right.

Tom Parkin 12:11

Um, while the margins on grocery stores rose 56% or two and a half times faster than the general inflation rate. So this data isn't just you know below the full. I I think it went completely unreported by any major media outlet. But if you do want to read up on it, I did I have uh uh my my Substack data shows, I have a write-up on it there. You can Google it, and it's got some pretty charts as well. So it that this data, like just to be clear, this data doesn't mean there aren't also increases in wholesale prices that are driving food or fuel inflation. Obviously, there's this there's a war, uh, there's crop problems from time to time, all these things. We're gonna talk to Jim Stanford about that in a bit. But what the data definitely does show, what definitely does show, is that grocery and food retailers are jacking up their take from the price that you pay, rising more than twice as fast as in other retail sectors. Now, of course, gas and grocery retailers have to pay wages, they have to pay rents, all the stuff that it takes to run a business, and that's what that margin is supposed to be for. But, you know, uh I don't think anybody um working at a grocery store got a 45 or 55 percent wage increase, and commercial rents are not going up that fast either. So there's a lot that is um, you know, in a world where your sales margin is going up very quickly and your costs are not going up as quickly, uh that's called gravy. And um Loblaw's company is of course the 52% 52% owned by George Weston Limited, Lawla's being, of course, one of the biggest grocers in this in this country, they released their first quarter financials uh mid early May. And and let's just say, Nikki, um the Weston family is holding up pretty well in these tough times. Uh a lot better than I don't tend to worry about the Weston family. No, I think I think they're gonna make it. They're gonna make it. Uh on May 6th, they uh released their financial statements for Q1 2026, reporting revenues of $14.5 billion, $14.5 billion for three months, uh up $580 million from the same quarter of 2025. The earnings of the company were three uh five hundred and forty, sorry, five hundred and ninety-four million, up ninety-one million. And I know that sounds like a jumble, but here's the key number, up 18% from the same quarter of last year, and their financial statement reported that the quarterly common share dividend increased 10%. So they got a 10% dividend hike. Uh, and they said that's the 15th consecutive year dividend increases. Now, I know you and me and Doug, uh Doug, our producer, are doing this podcast thing because a long time ago we talked about it, and as traded traditional media fades, the right wing is uh creating its own disinformation sites and labor and social democrats um we we felt that we needed to create a space to have our own discussions. Um and and you know, here's the thing that we also have in in common with the Westons. Nikki, just like you and me and Doug, who are digging into our own pockets to put up this little media enterprise, so are the Westons with all that money that we are giving to them in those expanded margins. Last November, right around the time we were digging in for, I don't know, paying for software or something like that, um, a new set website was registered called bGiant.ca. I'd never heard of it, but it launched this winter with a kind of slick uh website. But you know, the part I really loved is like jack of the box. Boom, 14 employees on the first day. Um, and quite the slick website. A lot of the most recent articles contain uh uh commentary from CEOs offering their thoughts on how to make Canada great again. Much of it gleaned from uh a joint Royal Bank of Canada Eurasia Group event earlier this month. Eurasia Group is at geopolitical risk consultancy where Gerald Butts, John Bow uh, John Baird, Dominic Barton work. And so did Prime Minister Carney's wife, uh Diane Fox Carney, worked there until recently. Anyway, the contact information on the B Giant website registration that it that's covering all this kind of CEO news gives an email address back to Whittington Investments Company. That's the holding family holding company that owns that 52% share of lobbless. So, Nikki, it is nice to know that Galen Weston is also digging into his pocket to fill the void uh as traditional media fails and fades. But uh, you know, of course, unlike um the three of us, uh his pockets are being well filled by the fast-rising grocery store margins that are driving inflation, hurting people, damaging our economy. And, you know, I guess for all that he gets gets to call himself a uh uh a philanthropist and a patriot. But I I I think kind of what this whole episode shows is that once again the old proverb is is true. Freedom of the press is for those who own one. So everybody go get your press. Uh all right, let's let's take a look at it. Anyone can do it. Anyone can do it in the digital era. Yeah, just that the the Westons can do it a lot, you know, a lot faster. Yeah. Let's take a quick break and we'll be back with Jim Stanford.

Jim Stanford on economic Carneyism and the cost of Donald Trump's war

Nikki Hill 17:45

Jim, welcome to Left East to West. Thanks for joining us.

SPEAKER_05 17:48

Thank you, Nikki. I'm glad to be here.

Nikki Hill 17:50

Yeah, we're glad to get you on. Uh, folks will know you from your frequent economic commentary, but they may not know that after you're you completed your PhD in economics, you're also a political director for about 20 years at Unifor. And then for about a decade after that, you were the director of the Australian Center for Future Work, but came back to Canada doing a separate center for future work here in Vancouver since 2020.

SPEAKER_05 18:14

Absolutely. Yeah. I was the economist uh at uh the Canadian Auto Workers and then Unifor. And then uh I left in 2016 to join the think tank world where I've been working since.

Nikki Hill 18:25

That's great. I'm glad you are.

unknown 18:28

Okay.

Nikki Hill 18:28

Somebody's got to do it. Someone needs to do our thinking. Okay. We're gonna dig into it and and pull some of those things out of your brain. So recently you've been talking, as many of us have been, about the Iran war and the price of oil that is um not a lot of space being taken up here in the Canadian public debate, even though there's, you know, rising pressures for the public. So the price of gas is up a lot, even though most of our oil is domestically supplied, and what we import is not supplied from places affected by the war. But when the public's filling up their tanks, it's costing, you know, upwards of $30 more. Where's that $30 going? And how damaging is this fuel inflation? Can we prevent it?

SPEAKER_05 19:12

Well, um, you don't need a PhD in economics to figure out where the money is going. It's going to the oil companies. Uh they are, you know, most of the oil that we consume in Canada is produced in Canada. And the price of producing it, the cost of producing it hasn't changed since Donald Trump started this war. So the fact that your gas tank is $30 more to fill than it used to be means uh, for the most part, $30 profit for the for the oil industry. Their costs are the same and their revenue has jumped. Uh and this kind of raises a fundamental question that I'm sure many Canadians asked. They saw the price of gas jump by several cents a liter within hours of Donald Trump starting the war. And knowing full well the gas had been in the reservoir under the gas station for days or weeks. So what what gives? And even allowing for the time lags and so on, the the oil that we consume didn't come from the Persian Gulf. So why are we paying that much? Uh it will have a um a negative impact on Canada's economy at a moment when we we don't need more bad news. We need good news. You know, the economy has kind of slowed to a halt in the year since uh Donald Trump's tariffs came into effect. We should be having lower interest rates to help the economy through this, but instead we'll probably get higher interest rates to try and control the inflation resulting from this uh price spike. And in the meantime, uh uh we estimated in our research about $50 billion of extra consumer costs, both direct for the gasoline and diesel and fuel oil, but more importantly, indirect through higher prices for all the other things that use petroleum products in their production. That is actually a bigger hit ultimately to consumers than just the gas price. Uh, and that's going to take uh real purchasing power out of uh Canadians' household budgets at a time that they can't afford it. So it's bad news all around. It's likely to get worse despite this so-called peace deal that uh Trump has signed. And it's uh utterly unnecessary. It's unnecessary uh immediately because, of course, Trump didn't have to start this war. It accomplished absolutely nothing. Um, but also unnecessary because Canada is a huge net exporter of energy. We produce way more than we use, and there's no need for us to have to ride the same roller coaster uh as the world oil price.

Tom Parkin 21:29

Yeah. And uh Jim, we um we're uh you've been talking you've talked a little bit about the idea of uh trying to really take some of that windfall profit that the oil companies are are making and reinvest it in Canadian economies. Don't just explore that for a sec.

SPEAKER_05 21:45

Yeah, um you know we estimate that uh uh revenue to the upstream industry alone, that's the uh part of the oil industry that extracts uh oil and gas and and uh ships it around, will probably grow by between 65%. And $100 billion this year because of those $30 extra that Nikki paid for her gas, and millions of other Canadians paid for their gas. And the oil industry always benefits from a shock like this. The oil industry uh uh set records, all-time records for its profits in 2022. That's when we had the last oil price shock after Russia invaded Ukraine.

SPEAKER_04 22:26

Yes.

SPEAKER_05 22:26

Fun fact, Ukraine doesn't produce oil. So that whole price shock, in a way, was uh almost imaginary. It was driven by the uh speculative excesses of uh oil futures markets, not by a real supply shock. But nevertheless, uh oil prices shot up to over $100 U.S. a barrel, and we had that was the biggest single cause of the inflation that we grappled with in Canada. Inflation hit 8% four months after uh that invasion. Now, there were other things going on, of course, the reopening after the pandemic and so on, but um the the inflation uh uh was primarily caused by that oil price shock. Um, so we're gonna see actually new records set for oil profits this year, uh breaking those 2022 records. And um, you know, there's various ways to try and address this inequity. You know, Canadians are suffering and paying extra, and the oil industry is making record profits. That is unnecessary and it's clearly unfair. One way would be to have an excess profits tax. So, you know, various forces on the left have been uh proposing this, and there are precedents for it. Uh Canada, uh, for example, imposed an excess profits tax on the banks and insurance companies in 2021, 2022 during the pandemic, because they were making huge profits at a time of economic and social emergency. You know, the same argument could apply here. Um so then you could capture uh sh a share of this uh excess profits and uh redistribute it, either give it back to consumers through the GST credit or uh use it to you know invest in infrastructure. You could use it to support the rollout of renewable energy infrastructure as a way of getting off the fossil fuel uh roller coaster uh in the first place. So there's other things that I think we should be thinking about long run as well, bigger issues like why do we set our prices for energy in Canada, at least for oil products in Canada, based on the world price rather than the actual cost of producing it here in Canada. That's a question that I think we could ask, and there's different ways to do it. We haven't always done it that way in Canada, and we don't have to do it that way. Uh we also have to ask about inflation uh and anti-inflation policy. Uh the Bank of Canada's one and only uh hammer in its toolbox is increasing interest rates, no matter what caused the inflation. Even if it was caused by something that had nothing to do with Canada, this war in the Persian Gulf. Yet their only response is going to be to jack up interest rates uh and make us all pay again, not only at the gas pump, but now in higher debt charges. And there are other ways that we could go at uh trying to uh manage inflation, I think, that we should be uh thinking about. But the most immediate and sort of incremental response would be uh an excess profits tax on the uh oil industry, and I I think it makes a lot of sense.

Tom Parkin 25:15

Well it gives some choices. It would be nice to have some choices. Um we keep hearing the refrain that Canada we have what the world wants. It's a sort of a a pep talk about our resources and our export potential. But uh you're also trying to make an important additional additional point. Yeah, people want our resources, but we should want to export them with value added, not just to be hewers of wood and drawers of water, but to but to export complete products rather than just unfinished resources. Um you told a Senate committee. Uh you were at a Senate committee a couple of weeks ago, you talked about this industrial policy that uh could uh add more value added to producing. Um that might fall in deaf ears in Ottawa, but if you were a provincial premier and inclined to this kind of line of thinking, what advice might you be able to give to them about how to get this idea in motion?

SPEAKER_05 26:10

Mm-hmm. Well, you've touched on a uh a long-standing theme, uh, Tom, in in Canadian economic policy, really going back to confederation. You know, the the the whole uh national policy that John A. McDonald brought in in the 1870s was all about building uh Canadian value-added industry as a way of protecting ourselves against annexation by the U.S. Then you know we had the the wartime planning under C.D. Howe, which was about building our value-added and industrial and technological capacity so we could play a role in the war in World War II, but also so that we'd have stronger industries after. And it worked. That's how we got an aerospace industry uh in Canada and the early beginnings of our auto industry. Uh then we had other uh sort of strategies through the post-war era to try to uh develop value-added capacities in Canada, like the uh Auto Pact uh, for example, um, where uh the government was managing trade and managing investment and managing investment location decisions uh with an eye to um uh escaping that sort of staples trap, as it's often called, uh, of Canada being a supplier of primary resources and and nothing else. Um we we we've been addressing this problem, and frankly, we made a lot of progress in the 20th century. By by the turn of the century, by 2000, we were no longer a hewer of wood and drawer of water. Most of our exports, 80% of our exports, were value-added manufacturing goods. Now, unfortunately, we've been going backwards big time uh since then, uh led by the whole focus on uh bitumen and oil sands, of course, and the and the boom in oil production uh from out west, but other resource uh sectors as well. So last year, 50% of our exports were value-added uh manufactured products, down from 80% in the year 2000. So it's been a quarter century of going backwards in structural terms and uh kind of you know back to the future to become this resource uh supplier. Now there's all kinds of propaganda from the oil and gas sector, which wants public favors to, you know, make more big investments, uh saying, you know, this is what Canada can supply the world, this is what they want from us, this is our solution to Donald Trump, uh, that is to double down on resource exports, include especially oil and liquefied natural gas. And uh, I think that is the absolute wrong lesson. Um and uh at the same time as we do need to diversify our trade away from reliance on the U.S., we also have to diversify what we sell to the world, not just where we sell it, and and and make sure that we aren't just digging stuff out of the ground, because there's all kinds of risks to that resource dependence. Uh there's economic risks, there's geopolitical risks, there's environmental risks, of course. So uh both provincially and federally, um, it's essential that governments um take a look at what value-added and high-tech and innovation-intensive opportunities are in their parts of Canada and don't trust the free market to deliver it. That will never work. We need active industrial strategies to build those uh those industries, and provincial governments and the federal government have have a role to play. The the whole discourse in economics around industrial policy has really changed in the last few years, partly with the pandemic. Uh, and the you know, the old idea that governments should just stay out of the way and sign free trade agreements and let industry decide what we specialize in has really been debunked and mostly discarded. So I sense a new openness to the whole principle of industrial policy at the federal level and in in most provinces. And I think that, you know, e even as we're grappling with Donald Trump and this latest oil price shock and so on, we should keep a real focus in Canada on how do we become a fully fledged, diversified, capable industrial economy, not just a supplier of raw materials.

Nikki Hill 30:12

Yeah, that's interesting. And I think we've also, you know, in in the in the past, a bit particularly since Trump's tariffs have been impacting policy. So we've gone back to this, you know, attracting investment to Canada to develop our resources. So, you know, our question is, I guess, if the world wants what we own, why do we need to keep providing tax concessions, public subsidies, and other tactics to induce foreign capital into develop our resources? And and so how do Canadians in that thread know if these deals are actually giving us the best price for our resources or that geostrategically they're being used in ways to strengthen Canada?

SPEAKER_05 30:48

Mm-hmm. Yeah, well, the the short answer, Nikki, is we don't need to do that. First of all, we don't need foreign capital. Uh Canada's got lots of capital. In fact, uh there's been a whole sort of historic change in Canada's relationship to global capital markets uh uh a decade ago. Uh we switched from being a net relier on incoming foreign investment to being a net supplier of outgoing foreign investment. So uh Canada or Canadians and Canadian institutions, including banks and investment funds and so on, now own more capital investment, both the direct foreign investment but uh also indirect or portfolio investment. We own more in other countries than other countries own in Canada. Uh so this whole myth that we need foreign investment is wrong. In fact, I'm I'm quite determined that we get some of our own capital back, uh, starting with pension funds. You know, why is the Canada pension plan, of all things, so heavily invested in Trump's U.S., a country that wants to take us over? The Canada Pension Plan is supposed to be about building Canada, building our society, but also building our economy. And half of its assets, fully half of its assets are invested in the United States. The same goes for other pension funds, but the same goes for other investors. Um and the reason they go to America is because America is a really profitable place to do business, thanks to the very, very pro-business and very unequal uh structures, uh, whether that's tax law or regulatory policy or labor markets, uh, et cetera. Um that's why capital flows there, and I'd like to get some of that capital flowing back to Canada, starting with our own capital. Uh secondly, in terms of what's required to facilitate the development of a an export fossil fuel project, you know, whether that's a new oil pipeline or an LNG plant or whatever, we shouldn't be putting a single dollar of public subsidy into that. There's no immediate public value, public interest in trying to make projects like that go ahead if there wasn't a private business case for them. Uh it's not like they're serving Canadians and that we must, you know, uh put these uh, you know, grease the wheels, if you like, or provide some incentives. We shouldn't provide a dollar of incentives. You know, even if there was a fully fledged private business case for an oil pipeline, which there clearly isn't, even then we'd want to have a hard look at it because of what it means for our economic structure, what it means for our environmental performance, and so on. But we certainly shouldn't feel a compulsion to subsidize it. And yet that's that's what we're seeing. We're gonna see a whole range of uh outright and disguised subsidies offered for uh oil pipelines, LNG plants, and so on, just because governments are desperate to make it look like something's happening uh in a moment when the economy is challenged by Trump. And uh I think it's the it's a knee-jerk reaction to go back to uh fossil fuel exports as our savior. Uh and I think it won't help us in the long run.

unknown 33:50

Yeah.

Tom Parkin 33:50

Yeah. We we've we've talked about that a little bit before. We've talked about mining and some some heavy uh subsidies going into mining and and really questioning what well if the subsidies are are why why are they required if uh you know these this is such a lucrative uh business uh in this mine, then but why why why are we inducing foreign capital uh with a lot of uh private money, uh public money? And we've so we've got uh uh Mr. Kearney, for example, uh he's been touring around, he's been talking to people in the Saudi Kingdom, UAE, Singapore about sovereign wealth funds investing in Canada. Um he's also though talked, and I think you've uh picked up on this and you've made a point about this that's important, he is talking about a sovereign wealth fund of Canada, like a Canadian sovereign wealth fund, but there's been some sc some controversy on what exactly he means by that naming and whether it really is what he's saying. Um and he's talked about it uh it's been raised in the context of something called asset cycling. And um port privatization, airport privatization being part of that asset cycling. Can you just explain how you know the good case and and maybe the the scarier case, the more worrisome case of what this sovereign wealth fund asset cycling and our public infrastructure, how does that all what what might be an agenda at work here?

SPEAKER_05 35:15

Well, the idea of a sovereign wealth fund, I think, is uh a good idea. And frankly, Canada uh should have created one years ago. Uh Alberta should have created one years ago. Yeah. Uh instead of using, you know, the uh fluctuating uh cream that comes to the government from oil prices when they're high uh to finance little silly giveaways, the latest one being Daniel Smith giving $100 to each Albertan. What a joke that is. Um instead of doing that kind of stuff or you know, not having a sales tax or other things, they should have put money aside from non-renewable resource rents and used it as a tool for active industrial development.

SPEAKER_06 35:54

Yeah.

SPEAKER_05 35:55

And Canada should do the same thing too. Uh the the the principle of a sovereign wealth fund is it's uh an investment uh platform that uh is used uh for public interest goals. Uh you know, it's not just a place to park money uh or play the markets. It should be used actively as a tool of economic and industrial development. Uh a good example, everyone talks about the Norway fund, you know, which is a big one and uh mostly based on oil. I think a better example for Canada is the Singapore uh sovereign wealth fund. There's one called Temasec, which basically holds a portfolio of uh minority equity positions in all kinds of strategic industries that have invested in Singapore. And it's used actively to try and develop uh value-added industries, high-tech industries, tech-related industries uh in Singapore to support that uh small country's capacities. And Singapore is a very, you know, uh very flexible, very innovative, very forward-looking place. Uh and the this sovereign wealth fund has been, you know, an important part of that story. Uh so in general, I like the idea of public investment and public investment in various channels, whether it was a straight-up public investment bank or a sovereign wealth fund or uh even using public pension money uh for development purposes. Uh the Quebec Pension Plan does that to some extent. Uh but I have no idea where Mark Carney's going with his idea. Uh and he's been vague, deliberately vague. They're gonna have uh uh a consultation process to find out what Canadians think about it and how it should should be uh structured. Uh but some of what he said, including this reference to asset recycling, he called it, uh makes me think this is not what a sovereign wealth fund should be. Um the the asset recycling idea is to take public assets, publicly owned assets right now, sell them, and then use the money to invest in something else. And it's not a way to build public wealth over time. It's a way to use a public vehicle uh to sort of facilitate different transactions. Um so you know, first of all, there's a direct risk from privatizing those things. He he's talked about ports and airports, but there's other public assets that could be on the sales block if that model goes ahead. Uh so consumers are gonna pay more because of it, the public interest is gonna be undermined. We'll see even national security issues if we get you know foreign uh foreign companies or foreign governments owning our ports and airports. That's not a good thing in this world. Um but then uh what the money is used for, I I'm worried it's gonna be used to just facilitate or uh disguise subsidy uh to some of these other private projects, including uh pipelines that uh can't stand on their own two feet as a business case. Okay, in comes our sovereign wealth fund to you know, take a big equity chunk or guarantee loans or de-risk the whole project uh to help it go ahead. So given the other directions of uh of Carney's uh policy, I'm worried the sovereign wealth fund would be more like a publicly owned private equity fund, you know, that jumps into different things, facilitates changes, and then uh and then gets out, you know, to maybe make a quick buck, but maybe not.

Tom Parkin 39:18

And in in this in this I in that scenario, the public assets like ports or maybe highways or airports or whatever public assets kind of get thrown into the fund, uh become liquid used for something else. That it they get turned into uh an investment that um that gets mobilized for a mine, for a pipeline. Is that is that what you're thinking?

SPEAKER_05 39:43

That's how it could happen. Um so uh I spent some time in Australia, as Nikki mentioned at the beginning, and for a while they were big time into this asset recycling model. And they sold off a bunch of their airports, a bunch of their ports, you know, with controversy. The the Chinese uh uh state-owned companies own a couple of Australia's ports, for example. That's what you want. Yeah, which which has issues. Um and then uh it meant that consumers had to pay for everything, you know, private airports, uh private toll roads, which are all over the place in Australia. Um and in theory, they the government was supposed to use this money to finance other public infrastructure projects without just normally borrowing money like governments normally do for long-term public investment. Uh so the whole rationale for it was dubious, and it was very much used as a tool of privatization. There's been a lot of rethinking in Australia more recently about this model, and I think they're gonna move away from it. Uh so it would be unfortunate if Canada went down that road, just as the Australians are realizing it's not the best way to do public investment.

Nikki Hill 40:48

They can't come back from it. Yeah, I mean, let's stick to this financing issue for a bit. There, because there has been a fair bit of controversy about using finance P3s for infrastructure over the years. We're still doing that, and now there's this new defense security resilience bank that's going to be offering P3s for major defense purchases. So, what are your thoughts on on using the of the value of using private equity or private credit versus public credit in these ways?

SPEAKER_05 41:12

Well, when it's a core public service or a core public infrastructure, um, it's wrong uh to privatize it. Uh and P3s, again, are another kind of stealth strategy for privatization. The public still pays for it. This is the thing. It isn't true, you know, marketization. The public is still paying the freight. Um, but there's now private equity interests involved trying to cream some of the surplus off of it. And they always claim that the private developer or the private uh operator will do things more efficiently or with less risk, and that's what saves the public money. And in practice, it it doesn't turn out that way. There's, you know, whole uh catalogs of case studies of P3s that have gone wrong, you know, from uh the schools in Nova Scotia, which were a scandal, to the bridge in Winnipeg, you know, to even some of the things that that we've done here in in BC, like the sea to sky highway construction. Tons of examples of P3s that cost to the government. The government still bears the cost, the government bears the risk, um, but the the private operator or private investor uh creams off some surplus. And it's not necessary. Governments borrow money regularly, and they should borrow money for uh public investment. Uh they get lower interest rates on their borrowing than any private investor can uh can get to access capital. And uh there's no evidence that the private sector automatically does it better. So on any of those core private uh sorry, core public services and public infrastructure, it should be owned and operated and um uh by the by the government, and the government should be accountable for making sure that the service is delivered uh effectively. Now, this defense production thing is a bit different. Uh it's more around procurement uh, I think, of uh different types of uh military uh military supplies, uh ships, submarines, other types of hardware. Uh and different systems. So, you know, those are areas that are not core uh public uh delivery, uh although there's obviously a public interest in making sure that it's done well and done effectively and that Canada gets some of the economic benefits from it. Um so it it will be interesting. I mean, you know, I I lament the fact that military spending is this big growing category of our budget in the first place. Uh on the other hand, as an economist, if we're going to spend the money on the military, we'd better make sure we're getting full uh economic benefits in Canada from it. And you know, some of the some of the negotiations, say with the Swedes on the aircraft or the Koreans on the submarines, have huge promise to, you know, uh inject new investment in a range of different uh sectors in Canada. And uh this defense uh industrial strategy that the the federal government has announced, I think has got uh has got some good potential uh to try and maximize the industrial benefits uh from those uh big purchases. Uh lamentable as it is that we're uh that we're spending so much on the military.

Tom Parkin 44:18

Just just splitting those two pieces apart. So on one side we've got the the the defense invest the the the expenditure for the public sector to you know buy new submarines, buy new weapon systems, all those kind of expenditures. But now we're talking about a finance pool. And uh Jim, it it it it seems the R RBC, I think, is the seems to be the the Royal Bank Canada seems to be the prime mover behind this thing, uh which was proposed at the G7 by Mark Kearney. Um and it and it seems to me that if you're gonna go buy a submarine from you know uh contractor X, and you you need the cash to do that today, um the choice is we're gonna go to some bank, which is backed by the RBC to get that money, or we're gonna just do what government usually does, which is float bonds. And I I I'm having difficulty understanding w wouldn't wouldn't the private always be more expensive? Can't the public sector always borrow more cheaply?

SPEAKER_05 45:14

Oh, absolutely. It it can. Uh interest rates, particularly for the federal government, uh are the lowest interest rates of any any uh source of borrowing in Canada's economy. Uh so um there's there's no reason why the the government has to turn to some kind of um uh uh complicated private private or semi-private financial mechanism to afford this. And uh I'm not sure that's what this uh national defense bank is for. It's it's kind of like sovereign It's kind of like the sovereign wealth fund that Kearney floated. Like, you know, he comes from the investment banking world, he loves that world, and and he's clearly trying to impart that way of thinking in major uh federal uh economic decisions. So the the federal government does not need to go to a bank uh uh to raise the money to buy the submarines, not at all.

Tom Parkin 46:03

Yeah. Okay, well let's let's pivot to something a little more tactile. Um auto assembly, you spent a lot of years studying this, so really looking forward to hearing your thoughts. Ontario has, I think, 10 by my count, auto assembly plants. They play a huge role in this province's economy. Trump's tariffs have uh absolutely have targeted the the especially the assembly side. Um and it was a sector that was already having some difficulty. The Oakville plant, uh the Brampton plant haven't turned out a car for a couple years now. Uh there's an Ingersol plant, GM Cammy, it's kind of touch and go, it's been reduced. There was a plan for a new Honda plant. That's now gone. That's EV strategy is poof, uh disappeared with um with the election of Mr. Trump. So there's a lot in process here. Um our struggling sector, renegotiation of Cuzma and the tariffs. Um and now Uniform is just starting bargaining with the Detroit 3, actually the day that we released this episode. So thinking about all these moving pieces, is it is it possible if you were the Ontario Premier or if you were the Prime Minister of Canada, is it possible to have a strategy when there's that many moving pieces in in play? Or or conversely, is it does that make it absolutely essential to have a strategy? Tell tell us what your thoughts are about that kind of contrast, short-term and long term as well.

SPEAKER_05 47:30

Yeah, your your second uh take on that, Tom, is the correct one. This is exactly when we need uh a strong, focused, flexible, well-resourced uh auto strategy, and both the federal and the Ontario governments have to play a big role in it. Um So uh Trump's tariffs, of course, are uh are an existential threat. Uh about 90% of what we produce in Canada is exported to the United States, and that has been true for uh 60 years uh since the auto pact came in in 1965. The Auto Pact was a free trade agreement of sorts. It meant that companies that participated in the Auto Pact could ship vehicles and parts back and forth across the border without tariffs, but it was it came with conditions, and the condition was uh that they the companies had to maintain a footprint, a manufacturing footprint in Canada that was broadly proportional to the amount of value added they sold in Canada. So if you sell here, you produce here. That was the philosophy, and it was a great one, and it worked. Then we shifted to free trade agreements in North America that undermined most of the value of the Auto Pact. And then we went down the route with the World Trade Organization, which quickly ruled the Auto Pact uh out of bounds, period. So uh since uh since the turn of the century, we've been operating without a safety net. And the the industry and governments, you know, I think have done an um a good job grappling with all of the challenges, you know, the the cost competit uh competition from Mexico, the uh global financial crisis in 2008-2009 uh really almost was a death blow to General Motors and Chrysler, uh, but we worked our way through that. Trump's tariffs, uh 25 percent tariff on Canadian and Mexican-made vehicles. Uh you can't overcome that. Um he said explicitly he wants all auto assembly to go to the United States. He's got no right to say that. They're not bringing jobs back to America. That's that's nonsense. Uh Canada has been producing cars as long as America has. Those are our jobs, not America's jobs.

unknown 49:37

Right.

SPEAKER_05 49:37

But Trump is going after them. Uh so the the impact has been severe. We've seen uh uh significant layoffs in different locations, a big decline in uh auto production and auto exports for obvious reasons. Uh now of the plants that you mentioned, Tom, one of them is actually a good news story. You mentioned Fort Oaksville. Yeah. Um and they they've gone through some changes, but they're gearing up right now uh for a huge uh uh a huge launch of uh large pickup trucks. Um so in a way it's the antithesis of the sort of the focus on electric vehicles that that was there a few years ago. But the the point is people still need these trucks and still buy them. Um so it's uh a very important investment in Canada. And it's also a sign that Ford is committed to uh its Canadian operations despite Trump's tariffs, unlike some of the other companies which have quickly stepped back uh from some of their Canadian plans. Uh so that is, I think, one of the reasons why Unifor chose Ford to be the first company to negotiate with, and they're and they're starting that uh today. Uh and so you know that'll be really important for the union and the company to show that you can still make things happen, even with Donald Trump. Uh their focus will be on stability and making sure the Canadian launch goes very well. Uh Ford also has big uh engine manufacturing operations in Windsor that are also launching new products. Uh so I I think I'm cautiously optimistic this could be a, you know, a positive step, but it doesn't solve the the elephant in the room, which is Donald Trump's uh tariffs. And the Kuzma renegotiation uh, you know, is kind of a lot of drama. There's supposedly a July 1st deadline, but it's not a deadline. And nothing is gonna happen by July 1st. I guess little is gonna happen this year. Um but the downside of that is for the industries that have been targeted by Trump with his sectoral tariffs, including auto, steel, aluminum, forestry, possibly others down the road, uh we're not gonna get any quick relief. Uh what we're gonna have to do is help these industries stay viable for the next year or two until either Trump loses the midterm so much that he has to back off some of his ridiculous policies, or eventually Trump's out of office and hopefully U.S. policy becomes sane again. U.S. business knows that it needs North American trade. Uh in aggregate terms, America gets as much benefit from that trade as Canada and Mexico do. There's no doubt about it. And American business knows that, and American business is telling the their government that. Uh so at the end of the day, I expect Kuzma to continue in more or less the same form. Uh, but those sectoral tariffs are gonna have to come off, or else uh the auto industry and others are are gonna are gonna be in real trouble.

Nikki Hill 52:30

Well, Jim, I think we had endless questions for you after we're we're heading into our six months. A lot of these issues have been coming up a lot on the show. Um, but we thank you for for joining us today and shedding so much light into some of these challenges and opportunity facing our country right now, and and of course, facing people in their pocketbooks and their families that maybe we aren't getting to the depth of the issue on. How can folks follow the work that you're doing?

SPEAKER_05 52:55

Oh, well, our our think tank, the Center for Future Work, has has got a good website, CenterforFuture Work.ca. And uh all of our research is open access there. There's also a mailing list you can sign up for or follow us on all the social media platforms.

SPEAKER_02 53:10

Wonderful.

SPEAKER_00 53:11

Thanks so much for joining us. We're gonna take a quick break and be back with Love It or Heave It. Thanks, Jim.

SPEAKER_05 53:18

Thank you very much.

Nikki's heaving Kristi Noem's connection to BC-based mine

Tom Parkin 53:30

Before we wrap up, we've come to the part of the show we like to call Love It or Heave It about something you love and want to keep or something you'd like to heave and forever forget. What do you got for this week, Nikki?

Nikki Hill 53:42

Well, this is definitely in the concerning category, probably definitely in the hate category for any dog lovers. Um the but the news broke in the past few days that a BC-based mineral exploration company has hired Trump's former Secretary of Homeland Security, uh Christy Noam, to a strategic advisory role.

Tom Parkin 54:01

That's the dog reference.

Nikki Hill 54:03

Yes.

Tom Parkin 54:06

What did she did?

Nikki Hill 54:09

Yes.

Tom Parkin 54:09

Was that the story?

Nikki Hill 54:10

Yes. What a weird. Something, something along those lines we don't like to talk about. So yes, but yeah, so she's joined this company, a speci-based company to do strategic advisory, supporting their mission, which is acquiring and advancing critical mineral exploration opportunities through an artificial intelligence enhanced technology platform. So don't, I'm not sure that that's you know, something that uh's got lots of background in from her from her governor role, from her role, of course, with ICE, which has been quite controversial before she departed from that role or was departed by the president. And and she still does have this mysterious role with this special envoy for the Shield of Americas, which is an entity that Trump established as well. Um, and she's the first one of that new, really related to uh activity and coordination across Latin America around cartels. So again, you know, interesting activity for her now switching into something that I think is bringing the concern, particularly for British Columbians, because there is this insight here about using critical minerals that are being prioritized, that are being mined here in the province. This company has a few sites already for mining in the province in mine, and then bringing someone in who's so tied into Trump and his ambitions into the realm of advisory here. So getting a little bit of chatter, I think, about, you know, people both being, you know, so the question of where's her, where's the fit here for us? But I think also that concern about the fact, because most of BC's mining products do get shipped overseas, can't trace what's being mined here. You know, when they're going into defense, when this company is looking at sort of the AI focused technology and defense contracts, they do have um some patents pending with the American government as well. And of course, we're always grappling with, as a country right now, this US interest in making us the 51st state. And now we have this both interest and threat from the states and Canadian resources, which is a constant in our lives now, and then and GNOME joining a company here as an advisor. So I think as it rolls out, lots to unpack with it and see what the implications are. But I think um definitely, and I don't think just limited to BC concern about what the role is of someone like GNOME with critical minerals and and yeah, what's going on there?

Tom Parkin 56:35

Uh you know, I was just thinking uh the the we in a couple weeks we're gonna sit down with uh Sabrina Fernandez, who's uh uh a br a Brazilian political commentary, uh political commentator. Um and uh because they've got elections, big elections coming up from Brazil. Brazil is a big country with a lot of resources, similar to Canada in many ways. Um and I wonder if she would have some insight on you know this how it's how the search for critical minerals, how the the shield of America, uh how that this kind of renewed Monroe doctrine that you know all the all the resources about the Americas are U.S. resources, how that's all shaken out in their elections and how they're how they're coping with it. Oh my gosh. Anyway, I I'm looking forward to that. That'll be interesting. I'd never been to Brazil. Have you?

Nikki Hill 57:24

I have not.

Tom Parkin 57:25

No? Okay.

Nikki Hill 57:27

Not yet, we'll see. Maybe we'll need a little podcast trip. Okay. Okay, Tom, what about the thing?

Tom Parkin 57:33

If the Western sponsor us.

Nikki Hill 57:35

Yeah, we'll head down to Brazil for a live show. Just like convention. Just like Winnipeg.

Tom Parkin 57:40

Winnipeg, yeah.

Nikki Hill 57:41

Okay,

Tom's loving the Conservative myth-making about their tumbling support

Nikki Hill 57:42

Tom, what's on your mind this week?

Tom Parkin 57:44

Well, I am loving the heavy, heavy doses of copium the National Post is trying to inject into the public debate about the conservatives sagging public support in the polls. Uh we've seen at least one poll now showing the Polyev conservatives under 30%. Um so the National Post dutifully is changing how support gets measured. In short, down is the new up. So according to Simon Tuck at the National Post, the conservatives are actually getting, as he says, quote, a boost in the polls because the gap in public support between the liberals and conservatives has shrunk a little bit over the last couple months. Um now I just feel obliged to tell Mr. Tuck that that's not how boosts work. Um a boost is when something goes up. Uh it's definitely not when something goes down, even if that down is going less fast than something else also going down. Um yeah, sure, like liberal popularity appears to have crested. I'd suggest it's a combination of some dubious right-wing things being done by Mark Carney. It's some good moves by Abby Lewis. But that doesn't change up and down. You know, here's the thing you know, up remains up and down continues to be down. On the left, we're always trying to create power by bringing people together. And, you know, just it seems to me that truth and facts are an important part of our value set because they provide a way that we can reach common understandings and then move ahead. Um, but on the right, increasingly it seems like like facts and truth not important. What's important is myth and just continue to spin um, you know, and and repeat like as if you're in some you know, cult. Um but you know, at some times, like in this case, when you know, apparently we're supposed to believe that um the the lib the the the conservatives are going up because the liberals came down a little bit faster, that somehow that's a boost for the conservatives. I mean, it's just so kind of comically funny. Um it's sad. And I find that actually kind of amusing. So I love it.

Nikki Hill 59:51

Okay. Well, and interestingly, I think while we're recording, uh Pierre Polyev's actually back here in BC on that myth and faux outreach machine doing uh an announcement around private property rights in the context of indigenous rights. So yeah. The um and so you know that's continuing to really shift the public discourse into what they're concerned about, what's real and what's not, and as a really an attempt at, you know, to get them up in the polls. So there we are.

Tom Parkin 1:00:18

Mm-hmm. Mm-hmm. Yep. A lot of distortion. Let's just keep the distortion machine running. Yeah. Anyway, there's some loves and hates. Uh Nikki is like a potential heave, I think, if I'm hearing it right.

Nikki Hill 1:00:30

Oh, yeah. I mean, I hate it.

Tom Parkin 1:00:31

Yeah. Yeah. Yeah. Um, anyway, you've heard from Nikki and me now, so you can email us at uh leftewest at gmail.com if you want to tell us about what you're loving or heaving. And you can tap the follow button on your podcast player to get reminders of our upcoming interviews with Ontario NDP leader Marit Styles, with Carla Beck, and uh the leader of Saskatchewan NDP and Jared Walker, the executive director of the Canes for Tax Fairness all in the next few weeks. So looking forward to that. Thanks for joining. And Nikki will see you later. Have a nice week.

SPEAKER_00 1:01:06

Yeah, you teach Tom.

Tom Parkin 1:01:07

Okay, take care.

SPEAKER_02 1:01:12

Thanks for joining Left East to West with hosts Nikki Hill and Tom Parker. We'd love to hear your comments, ratings, follows, and shares. It helps people find us. To become a Left East to West community member and to help us reach even more Canadians. Subscribe using the link in the show notes. You can watch us on YouTube or listen wherever you get your favorite podcasts. Just search for Left East to West and subscribe. I'm Doug Hamilton signing off for Left East to West. I will see you next week.