“There’s certainly an opportunity around defence, but it’s more than building ships,” Bank of Canada governor Tiff Macklem told an audience last month in Halifax, a place that still celebrates a time when Nova Scotia was a force in global shipping, but that has done little more than build vessels for the Navy and Coast Guard for as long as any living person can remember. 

Macklem sometimes takes on the unofficial role of Canada’s chief economist. This was one of those times. He seized on shipbuilding, but he could have chosen any number of industries that owe their longevity to habit as much as economic fundamentals. Macklem didn’t say it outright, but he offered a short lesson in path dependency. The forces that cause us to stick with what we know might explain Canada’s economic malaise better than anything else. 

I don’t know enough about the shipbuilding industry to make assertions about why Canada peaked when self-taught naval designer William Roué finished the Bluenose in 1921, but I’ll offer an observation. When the federal government decided to get serious about the Arctic in 2024 and needed help building icebreakers, it turned not to Asia, home of many of the low-cost shipyards that are often blamed for destroying a storied Canadian industry, but to Finland. 

Finland makes the world’s best icebreakers because it once faced an existential crisis. It found itself on the losing side in the Second World War and had to pay reparations to the Soviet Union, including a promise to supply it with ships. Like Canada, Finland had little industrial capacity midway through the 20th century. Instead of submitting, the government stood up a shipbuilding industry overnight. It met the terms of its agreement with the Soviets, and then became an exporter of a high-value good that generated ongoing investment and supported thousands of high-wage jobs. Finland didn’t settle for just supplying the massive market next door. Historical contingencies forced it off path dependence. It decided that it wanted greater control over its fate and devised a plan to make that happen. 

You often hear that Prime Minister Mark Carney’s “build, baby, build” agenda is destined to run into political headwinds because building things takes a long time and therefore he will lack evidence that his program is working. 

I don’t know. I think most people understand that it takes months to negotiate a trade agreement and years to build a pipeline. What they want to see is evidence that their leaders are engaged and ready to fight inertia and drift. In the span of a few weeks, Carney signed a 100-year partnership with Ukraine; hosted a massive gathering of international investors; opened the door to an enhanced partnership with the European Union; let it be known that a trade agreement with India could be concluded by the end of the year; basked under the halo of LNG Canada’s $33-billion expansion plan for its natural gas plant in northern British Columbia; and announced that approvals for Alberta’s newly named Pacific Link pipeline project would be fast-tracked.  

The flywheel is spinning. The challenge now is to get it spinning faster amid the headwinds from U.S. trade belligerence and the tug of nostalgia for the way things were. That’s what Macklem was getting at when he alluded to all the money that will be pouring into defence, energy and other targets of Carney’s industrial strategy. 

Government spending is one of the terms in the equation for gross domestic product, so Canada’s economic growth is about to get a boost. But if we aren’t deliberate about it, we’ll end up with an economy that looks and feels a lot like the one we already had. “It’s [about] developing the technology for dual uses that can be used in military and in civilian,” Macklem said in Halifax. “It’s going to take a determined, sustained effort. This can’t be a few quarters’ burst in investment. This has got to be sustained.” 

My rough categorization of the projects in the Alberta and Saskatchewan deal books suggests “old economy” opportunities outnumber “new economy” opportunities by a ratio of two to one. That looks like a resource trap, but people with deeper knowledge than me insist that you have to start somewhere. The best way to offset the economic gravity of the U.S. is to embrace Asian and European demand for energy, minerals and food. Then, you add layers of advanced manufacturing, technology and services on top of those primary industries. 

We’re often quick to equate our vast supplies of natural resources with economic strength. That’s not wrong, but it’s also the same as thinking you’re ready for a day on a construction site because your gym muscles make you look good in a T-shirt. Canada has a lot of global commodities, but so do others. That’s what makes them global commodities. It’s how we use them that creates economic strength. We can keep shovelling potash out of the ground. We could also develop cutting-edge technology and extraction methods that reduce the environmental impact of that shovelling, or refine high-end potassium sulphate, used for growing fruit, nuts, coffee and tea, instead of settling for producing low-end muriate of potash, used for corn, sugar beets, celery and other vegetables. 

“If you have that refined product and a cleaner footprint, you have an entirely different market of where you [could be] going,” said Alison Nankivell, chief executive of Export Development Canada. “You’re not easily replaced anymore, by anybody.” 

Laments about Canada’s failure to get out of the ruts created by British colonialism and American empire used to be about opportunity cost. Now, they are about sovereignty. The U.S. administration has put on paper that it intends to dominate the Western Hemisphere, much as the Soviet Union intended to dominate eastern Europe after the Second World War. Finland’s trajectory shows that it’s possible to resist a hegemon, but only if you are deliberate about it. 

Canada doesn’t have much experience with carefully orchestrated industrial policy. Fortunately, it’s never too late to learn. 

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.