Adapting to change

When it comes to regulations, Liberals engage in all sort of economic gymnastics to try to appease or offset the cost of implementation with hand-wringing commissions pointing at the need for profit subsidies. Canada has even implemented the ridiculous concept of regulatory cost neutrality, where any new regulation has to be balanced with the removal of equal costs of other regulation. As if new needs for regulations, say around safety, negate old needs for unrelated regulations, say around environmental concerns.

The current imposition of tariffs by the USA's government has meant huge amounts of money will need to be spent complying with regulations. Never mind paying the cost of the tariff and also considering reinvesting to move operations to avoid tariffs.

In this context, it is hard to understand that normal regulations are even a thing to worry about.

It is a lesson to everyone demanding increased regulations. Capital may complain about it, but they will allocate money to make profit irrespective of what the state demands in regulatory compliance.

Massive shifts in trade policy (tariffs being one aspect of that) is going to cause massive shifts in investment. We do not know what it is going to look like coming out of the other side of this, or even if there is an other side.

However, one thing is clear: private investment in Canada is going to fall through the floor. And, because we have structured our entire economy to be based on that private investment, our economy is going to also fall through the floor.

This collapse in private investment is what folks in government (and labour) are super concerned about countering. Unfortunately, the dominant economic theory says that the only way that they can intervene is to provide more profit subsidies to capital through wealth transfer from the public sector to the private sector. In the previous five decades, this has meant profit subsidies and regulatory cost reduction.

This is not going to work today for many reasons, including:

1. There is now not enough public wealth that can be transferred to save capitalism in Canada, since much of it has been handed over already.
2. The goal of regular people is not to "save capitalism in Canada" and they are not going to provide that subsidy out of public taxation willingly.
3. The Americans will take all our profit subsidies with a smile—since American capital owns our productive assets—while they are walking out of the country.

Capital is taking advantage of the moment like the Left is not. Boards of Trade and other associations in different sectors of capital have united around a single group of policy demands and a narrative to match:

• Money for businesses to adjust
• Tax cuts
• Tax deferrals
• Inter-provincial trade barriers
• It is about negotiation
• A measured and reasonable response

None of these actions will help the Canadian economy weather this current storm while the reorganization in supply chains that support endemic production happens.

• Undirected money/grants for business is just as likely to support the relocation of a business.
• Tax cuts are just undirected profit subsidies, again likely to go to capital leaving.
• Tax deferrals are undirected supports that will include extremely profitable companies. This is not a program of redistribution that is necessary.
• An unsophisticated removal of inter-provincial trade barriers will simply transfer wealth from one part of the country to another, not drive growth.
• It is not a negotiation with the USA, it is a shakedown.
• The measured response is the rational response which should be based on real analysis of the impacts being felt and responding to them. The measured response is a full response internally. It is not a wait and see response that will leave critical decisions and investments unmade.

People thought that the market would discipline Trump. They are very wrong. If Trump's folks listened to the financial markets, they would not be proposing and implementing tariffs in the first place. Trump may pull back on the speed of transition to this new program, but that will not stop it.

Even thinking that the "market" will be disciplining the Trump administration when they eventually pull back on their most extreme positions is to relinquish our future to a battle between two sides of the same system: American capitalism. And, it isn't a program of opposition.

Trump will off-set the pain felt by endemic American capital by providing the largest profit subsidies they can get away with.

And, workers will surely lose either way.

However, when we look at the calls and discussions happening in Canada, it seems to me that most of them are within the socialist economic program, not a liberal capitalist one.

People are calling for government to intervene, to build assets, to respond with active policy, support for workers laid off, to adjust supply chains, and to build a united front against the attacks on sovereignty. These are all a call to an old socialist ghost in Canada.

When Canadians call for these things, they do not mean hand-outs to companies and allowing the market to do what it will to maximize profits (i.e., move to the USA). Canadians mean democratic intervention in the economy to save production that is necessary for Canada's economy and society to function.

They mean socialist orientated policies.

There was a time during the pandemic that the same thing happened. "We are all socialists now" was written across the pages of even hardened liberal news agencies. That's because the response to this kind of crisis and market failure is not more markets, it is socialism.

The pandemic was not that long ago. People remember.

We are going to have to start saying it again or we will end up with a country devoid of any investment or production and no democratic structures left to support each other.