COMMENTARY: Carney and Trump – More Similar Than They’d Like to Admit

Mark Carney rose to power as Canada’s answer to Donald Trump. Measured, intellectual and firmly establishmentarian, Carney seemed the perfect counterweight to the erratic emotional American disruptor. And when Trump surprised the world by aiming his guns northward in the opening salvo of his second term trade war, Carney leaned into his anti-Trump role, challenging the president on the world stage in Davos. Now he is being cast as the “darling of the global anti-Trump movement.”

But the two men, so different in style and temperament, are more similar than either would perhaps like to admit.

Each has cast himself in the starring role of his nation’s economy—the chief picker of winners and losers. And in so doing, each has rejected the rules-based system of equal economic freedom that made the US and Canadian economies the envy of the world. Both Trump and Carney claim to have charted a new and bold course. In fact, they are attempting to resuscitate an antiquated approach to economic policy making, government-directed industrial strategy, that doesn’t work.

The father of modern economics, Adam Smith, wrote a 1,200-page intellectual takedown of the approach 250 years ago this month. At the time, economic policy makers in Europe saw wealth as a zero-sum game. Their solution was to use state power to take it back. Through discriminatory tariffs, subsidies, and government-granted monopolies, they believed that wise men could direct vast economic systems, helping their countries grow wealthy.

Smith would have none of it. He took aim at policymakers who, “instead of allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice… bestowed upon certain branches of industry extraordinary privileges [and] laid others under… extraordinary restraints.”

Instead, he believed the best way to raise the general standard of living was to permit “natural liberty” for all: leave people alone to pursue their own interests in their own way, with “peace, easy taxes, and a tolerable administration of justice,” and their wealth will rise.

In the two-and-a-half centuries since Smith wrote this, economists have accumulated ample evidence in support of his claims. Hundreds of careful econometric studies have found that greater economic freedom for all is indeed associated with better living standards, marked by higher and faster-growing incomes, less poverty, greater productivity, cleaner environments, and more satisfied populations.

Neither Carney nor Trump seem persuaded.

For his part, Trump’s tariffs are designed to suppress the natural liberty of American consumers and manufacturers, making it harder for them to buy from abroad. His tariffs have not just disrupted the world economy; they’ve significantly curtailed the economic freedom of his own citizens, making them pay some of the highest tariffs in the world.

But not everyone has to pay these hefty rates. Trump and his team have spared particular companies and industries with the right lobbyists and connections, granting thousands of exemptions and special carve-outs.

His so-called trade deals haven’t lowered barriers to trade and investment as much as given him control over trade and investment. Asked about his EU deal, he replied, “The details are $600 billion to invest in anything I want. Anything. I can do anything I want.”

Trump has picked winners and losers in other ways. Reversing decades of Republican orthodoxy, he’s ordered the federal government to take direct stakes in about a dozen companies ranging from Intel and Westinghouse to Lithium Americas and Trilogy Metals. When he hasn’t taken a direct stake, he’s simply asserted the power to dictate company decisions, including naming rights and factory locations.

North of the border, Carney has taken a similar approach, though he uses different tools. Eschewing tariffs, his preferred policy levers are targeted exemptions to Canada’s otherwise remarkably unfriendly regulatory regime, the expanding burden of which strongly discourages investment and economic growth.

Carney’s signature legislation—Bill C-5, known as the Build Canada Act—empowers the PM and his cabinet to fast-track approval of particular projects that they favour by allowing them to circumvent Canada’s vast regulatory minefield. Like Trump’s tariff exemptions, this will be a bonanza for lobbyists seeking special privileges. Carney has so far resisted a broad rollback that would benefit all Canadians, ensuring all those who want to invest in Canadian projects but fail to obtain the prime minister’s favour will remain tied up in red tape.

Carney’s Red Tape Reduction initiative took a similar tack. It originally attempted to foster innovation by allowing cabinet to exempt any business or person from any law except the Criminal Code for up to six years. The plan has since been watered down to placate political opposition, allowing exemptions for only financial and clean tech sectors from numerous laws and regulations for up to six years. As with the Build Canada Act, the Carney approach is to have government officials decide who gets special treatment, while everyone else remains burdened by the old regime that has made Canada so antagonistic to investment.

Adam Smith warned us about men like Trump and Carney. They assume authority over people that should be trusted to no one. And is “nowhere… so dangerous as in the hands of a man who [has] folly and presumption enough to fancy himself fit to exercise it.”

Matthew D. Mitchell
Senior Fellow in the Centre for Human Freedom, Fraser Institute

Nadeem Esmail
Director, Health Policy, Fraser Institute