Is “muscular industrial policy” coming soon to Alberta? Freeland Doctrine suggests it might

Freeland Doctrine + AFL report + Alberta NDP government could shake Alberta to its core

Chrystia Freeland delivered a series of speeches lately that sketch a new economic alignment – dubbed the “Freeland Doctrine” – for the world’s democracies. Canadians haven’t grasped yet how momentous this is. The Deputy Prime Minister is arguing, rightly in my view, that the restructuring wrought by the energy transition, accelerated by COVID-19 and Russian militarism, is a once-in-a-century opportunity for Canada to re-engineer its economy. Surprisingly, conservative Alberta could be the first province to buy in.

The Freeland Doctrine still feels incomplete, as if it’s being conceived on the run, but what we have thus far is intriguing. The premise is that the world’s democracies should stand together against autocracies like Russia and China. This includes growing trade with countries of like values and “friend-shoring” – a phrase she borrowed from US Treasury Secretary Janet Yellen – industry supply chains.

The real centrepiece of the Freeland Doctrine, though, is the embrace of industrial policy, which is a throwback to the more interventionist economic approaches of the New Deal and the Marshall Plan. Public ownership, for example, was commonly used by Canadian governments to grow industries like power, telecommunications, and energy distribution. But state intervention and investment fell out of fashion after the 1970s as governments shifted to more market-oriented policies.

Deputy Prime Minister Chrystia Freeland speaking at Thursday’s press conference in Edmonton. Photo: the AFL.

As evidenced by Freeland’s speech Thursday in Edmonton, the Liberal government is rethinking its role in the Canadian economy.

“What Canadian workers need—today and in the years to come—is a government with a real muscular industrial policy [emphasis added]; a government committed to investing in the green transition, to bringing in private capital alongside us, and to helping create good-paying jobs from coast-to-coast-to-coast,” Freeland told reporters at Thursday’s press conference with Alberta union leaders in Edmonton, adding that “We have before us a great opportunity as a country. But we must act to seize it and we should not assume our success is preordained.”

Real muscular industrial policy. What might that mean?

The work of renowned economist Mariana Mazzucato holds a clue. She argues for the return of the “entrepreneurial state,” where governments lead, accept risk (and loss, if necessary), invest alongside private capital and expect a return on that capital, and generally play a much more active role in the economy than they have for the past 40 years.

If this is where Freeland is going with her new doctrine, and I think it is, then Canadian business didn’t get the memo.

Goldy Hyder, head of the Business Council of Canada, who attended Freeland’s speeches in the US, wrote a letter Wednesday to Freeland harping on the same old policy themes: the need for incentives (financial and otherwise), regulatory certainty, and the policy “clarity” investors require to plunk down the billions required to finance the transition to a clean energy economy.

“Canadians must demonstrate to the world that we can successfully complete major projects and build the infrastructure that is required to access global markets,” Hyder added, clearly thinking of pipelines and LNG plants, among others.

This is the decades-old business narrative, but there is a new narrative emerging from the labour movement. The Alberta Federation of Labour (AFL) released a new vision for the Alberta energy economy last week titled, “Skate to Where the Puck is Going: An Industrial Blueprint for Job Creation and Prosperity.” [Full disclosure: I was contracted to help write write the AFL report. Read Energi Media’s conflict of interest policy.]

Gil McGowan speaking at Thursday’s press conference in Edmonton. Photo: the AFL.

The report married Mazzucato’s entrepreneurial state with former Alberta Premier Peter Lougheed’s ideas about activist government and public ownership. It called for the creation of a number of crown corporations that, where appropriate, would joint venture with private firms or go it alone.

Adopting the language of Muzzacato’s economic “missions,” the report recommended significant (perhaps even radical) strategies that included transitioning the oil and gas sector from producing feedstock for fuels to feedstock for materials manufacturing, like carbon fibre; a huge build out of clean electricity generation, perhaps by as much as five or 10 times the current capacity, arguing that clean and abundant power is a big competitive advantage in the 21st century; and mining for battery critical minerals and, even more importantly, investing in the refining and processing of battery metals, which today is dominated by China.

The AFL called for government to lead the pivot to a clean energy economy, accepting risk, and investing tens of billions in research and new ventures. While government might lead, the private sector would play an even bigger role, benefitting from the activity generated by public investment. A conservative economic modelling review suggested 200,000 new jobs could be created by 2050 while maintaining much of the existing hydrocarbon extraction employment.

Is this what Freeland meant when she argued for “real muscular industrial policy”?

Yesterday, Freeland held meetings and a press conference in Edmonton with AFL President Gil McGowan and other Alberta union leaders. McGowan told Energi Media that the Minister said she had read the AFL report and said that it was consistent with legislation and programs the federal government intends to introduce late this year and early in 2023.

“The Minister understands that Alberta labour gets it,” he said in an interview. “Neo-liberal economic policy of the past four decades is on the way out and more active government intervention, in the form of industrial policy like the US Inflation Reduction Act, is becoming popular again. She appreciates that our report is skating to where the puck is going, not where it was 10 or 20 years ago.”

Ordinarily, a federal cabinet minister liking an Alberta labour organization’s report wouldn’t be news. But these are no ordinary times. Danielle Smith’s short but scandal-plagued tenure as premier has already boosted the spring election chances for Rachel Notley and the NDP. Notley and the NDP have historically strong ties with McGowan and the AFL. The NDP’s Achilles Heel in Calgary, which will be the key election battleground, is the economy.

Might the AFL report, bolstered by federal industrial policy announcements, provide the NDP a way to reassure Calgary voters that Notley has a plan to create jobs and prosperity? The prospect of billions in federal funding and capital, bolstered by provincial spending, just might sway enough ballots to return the NDP to power.

These are early days. We don’t know how the Freeland Doctrine will play out. As I write this, the NDP have hired former ATB economist Todd Hirsch to advise them, which suggests a more cautious approach to economic policy.

But Chrystia Freeland’s new “doctrine” set off a sizeable political and policy earthquake last week and Alberta will likely feel the effects in short order. We’ll have to wait and see if they’re a political tsunami or a minor aftershock.

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