Daniel Eberhard can’t bring himself to bang his pot with the same vigour as many of the other innovators protesting higher capital gains taxes. 

“I don’t think it’s that intellectually honest [to suggest] that a bunch of people that were here, and were going to build companies here, are now going to leave as a function of this tax-rate change,” Ebherhard, founder and CEO of banking upstart Koho, said at the National Angel Capital Organization summit in Ottawa earlier this spring. 

I’ve been thinking a lot about what Eberhard had to say at NACO. He and Prime Minister Justin Trudeau’s government should be on the same side. 

Eberhard grew up watching his single mom drive a bus and clean houses to provide what he described as a “middle class life.” He co-founded a wind-turbine business and went farm-to-farm in Saskatchewan trying to convince “70-year-old farmers” to try something new. 

He was driven to start Koho because he saw how a lifetime of high banking fees and poor financial advice had robbed his mother of agency.

A big reader, one of the titles on the CEO’s list of recommended reads is Ryan Holiday’s The Obstacle Is the Way, a book about the stoic idea that setbacks are inevitable, and that we define ourselves by how we handle them. “Part of your job as a founder is to make no excuses,” Eberhard said. “The market is the market and you have to find a way to be successful within the market.” 

Eberhard has been in the trenches every day since before Trudeau was elected, fighting for the things the Prime Minister wants to achieve. Yet he feels alienated. 

The capital gains tax change is “powerful” because it’s “symbolic” of a “drift between how we think Canada should grow as an economy versus how the government does,” he said. “I think entrepreneurship is the best tool we have to both grow the economy and create social mobility for lower- and middle-income Canadians.” 

When Finance Minister Chrystia Freeland announced on June 9 that she would be going ahead with her tax plan, she acknowledged the upset in the tech community. “No one likes paying more tax, even those who can afford it the most,” Freeland said at a press conference staged at a YMCA in Toronto. “To those Canadians, I want to say, `We applaud your hard work and your success. You are making great contributions to our country. And we want more Canadians to enjoy success as you do and to contribute as you are.’” 

Freeland is a former journalist, so she would be familiar with the writers’ mantra “show, don’t tell.” I doubt Eberhard believes the finance minister cares about whatever success he’s managed to achieve from all his hard work. Fintechs such as Koho have been waiting on open banking regulations since 2018, and an overhaul of the financial infrastructure that is currently controlled by the legacy banks that was supposed to have been finished in 2019. Both are still years away. A government that cared about entrepreneurs would have levelled the playing field by now. 

The capital-gains backlash isn’t only about greed. It’s about policymakers in Ottawa and elsewhere who are always too ready to put other interests ahead of those of the entrepreneurs who are trying to build the next wave of great Canadian companies. 

It’s too easy to make this about Trudeau and Freeland, though. They are little different than the people who elected them. If there’s a problem, it’s us. We “applaud” entrepreneurial success, but do we recognize that someone like Shopify founder Tobi Lütke is creating wealth that will make the economy and society stronger to a degree that few politicians, athletes or entertainers ever will? I don’t think we do. If we did, we wouldn’t keep electing people who make their lives harder.  

Many in Canada dislike comparisons with the United States, because the U.S. is so far out of our league. Yet if we’re experiencing a productivity crisis, it makes sense to benchmark against the country that has arrived at where we think we need to go. There are very clear cultural differences between Canada and the U.S., which deserve more attention in the productivity debate than they’re getting. 

In his book about bourbon-maker Julian Van Winkle III, journalist Wright Thompson writes that Americans are “predisposed to respect craftsmanship” because of the country’s work ethic and “secular myths of bootstrap success.” Entrepreneurship is baked into the idea of America. Those who accomplish remarkable things in business are revered in their communities and become the subjects of books. That’s missing in Canada. The business narratives that do exist tend to revolve around corruption and failure.  

Stories matter. Norms are created and passed forward. “Canadian business leaders and the Canadian government have long been psychologically disincentivized from pursuing long-term business or national strategies that could challenge the established economic order, whether under British or American hegemony in the nineteenth or twentieth century, respectively,” writes Horatio M. Morgan, an associate professor of international strategy and entrepreneurship at the University of Waterloo, in a new paper that explores whether institutional differences explain the persistent gap in the performance of Canadian and American companies. 

Freeland’s budget this spring was a continuation of that history. Disruption is everywhere, but the government decided to stick with the established economic order. Examples include the billions of dollars committed to match U.S. clean energy subsidies and billions more to encourage more home building. Freeland needed money to pay for it all, so she chose to increase a tax that she determined would cause the least amount of harm. It was all very Canadian.

Fixing the productivity problem might require some new stories about how Canada creates wealth. Daniel Eberhard has a good one.     

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.