{"id":8012,"date":"2025-07-19T12:22:10","date_gmt":"2025-07-19T12:22:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/8012\/"},"modified":"2025-07-19T12:22:10","modified_gmt":"2025-07-19T12:22:10","slug":"carmichael-canadas-governments-are-making-big-bets-now-its-the-private-sectors-turn","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/8012\/","title":{"rendered":"Carmichael: Canada’s governments are making big bets. Now it’s the private sector’s turn"},"content":{"rendered":"

Normal is redefined on the regular these days, but what goes up still comes down. Those charts of geopolitical risk indices that had looked like rocket trails to infinity as Donald Trump resettled in the White House now resemble<\/a> sketches of the Himalayan mountain chain. We\u2019ve come off peak chaos. <\/p>\n

Of course, everything\u2019s relative when the U.S. president treats the rudder of world affairs like it\u2019s an on\/off switch. It\u2019s worth noting that even the Lesser Himalayas climb some 4,000 metres into the sky. Similarly, what passes for calm these days still means a risk premium that could severely hobble global commerce. Export Development Canada is among the latest to predict<\/a> that all the uncertainty will cause a Canadian recession this year.\u00a0<\/p>\n

The BlackRock Institute tracks 10 major geopolitical risks and it ranks only one of those threats\u2014a breakup of the European Union\u2014as \u201clow.\u201d Three are \u201cmedium,\u201d and six are marked as \u201chigh.\u201d And that\u2019s only the political stuff. It was harder to breathe in Toronto and Montreal than New Delhi and Beijing again this week because of drifting forest-fire smoke, a reminder that our real war is with climate change, not the Trump administration.\u00a0<\/p>\n

University of Toronto philosopher Mark Kingwell wrote<\/a> in 2020 that if humans understood that life was a series of bets, we\u2019d choose not to play. That\u2019s why narratives are so important. Stories guide us forward, like flashlights in the dark. What happens when all those torches flicker at once? It\u2019s worth considering because the extreme uncertainty probably isn\u2019t going away.\u00a0 <\/p>\n

Former Bank of Canada governor Stephen Poloz thinks<\/a> we\u2019ve entered a new industrial revolution marked by automation, digitization and artificial intelligence. Previous industrial revolutions brought the steam engine, electricity and the internet. Poloz observed in a recent essay that those periods also brought the kind of geopolitical chaos that we\u2019re experiencing now.\u00a0<\/p>\n

Before society benefited broadly from each of those shifts, the lives of many individual workers were disrupted, while the inventors of those technologies reaped outsized rewards. The unfairness fed populism, which led to reactionary policies and power vacuums that created opportunities for \u201cgeopolitical opportunism.\u201d\u00a0<\/p>\n

Poloz\u2019s thumbnail description of the mid-1800s, the early 1900s and the mid-1980s echoes loudly today. It\u2019s natural to assume that things will settle down, because settled is what we know. It\u2019s the backdrop for the narrative we\u2019ve constructed of how the world works. You see it in the assumptions that the central banks will eventually dull the pain of this crisis by cutting interest rates, like they have during every other crisis over the past few decades. Yet the inflation numbers refuse<\/a> to co-operate.\u00a0<\/p>\n

If Poloz is right, our individual reference points are useless because we\u2019re no longer in Happy Valley, that utopian moment where the peace dividend, globalization and rapid productivity growth combined to create a period of abundance. That could make coping with what\u2019s to come extremely hard.\u00a0<\/p>\n

\u201cFundamental structural changes in economies are rarely done in wisdom and foresight,\u201d Poloz wrote. \u201cThey are usually forced upon us. And the forcing mechanism is likely to be rising economic, financial and geopolitical stress, not a return to calm.\u201d\u00a0<\/p>\n

I\u2019ve started to think that our ability to cope with the unknown will determine how we come out of this moment in history. Canada will need to rely on its wits, which means getting comfortable with making bets on an uncertain future. This is where everything that Prime Minister Mark Carney and the provinces are trying to do could break down. We\u2019ve spent decades trying to erase risk from economic life to the point that few of us are willing to do anything without a guarantee.\u00a0<\/p>\n

\u201cCanada has become less and less risk tolerant,\u201d said Nancy Southern, chief executive of Calgary-based Atco, the electricity utility that has sidelines in renewable energy, modular building construction and defence. \u201cEverybody wants everything buttoned up. That\u2019s the tone from the regulator. That\u2019s the tone from the government, all levels of government. That\u2019s actually the tone from boards of companies today. You can\u2019t make a mistake.\u201d\u00a0\u00a0\u00a0<\/p>\n

It\u2019s tempting to assume the profit motive will propel Canada\u2019s capitalistic economy into the future, no matter the size of the abyss. That hope might be what Kingwell, citing Slavoj \u017di\u017eek<\/a>, called an \u201cunknown known\u201d\u2014a risk that goes unexamined because it\u2019s so tightly threaded into our idea of how things work. Profit margins have been strong and periods of disruption present all kinds of opportunity. But while fortune might still favour the bold, the finance industry has worked hard to make sure that doing almost nothing with one\u2019s profits is also highly lucrative.\u00a0<\/p>\n

In May, I asked Cenovus chief executive Jon McKenzie<\/a> why business investment in the oil industry had become so weak. One of the reasons he cited was onerous regulation and lower oil prices had made it too hard to expand production. But another reason is that companies such as Cenovus can keep their shareholders happy by repurchasing stock. \u201cIt\u2019s made capital allocation a much simpler game if you understand your worst-case scenario is where you\u2019re just buying back your stock,\u201d McKenzie said. \u201cYou understand the returns on that. Any investment you make in the business needs to supersede those kinds of returns.\u201d\u00a0<\/p>\n

The point isn\u2019t to further demonize share buybacks. I surfaced that comment to show that an unintended consequence of our efforts to remove risk from the economy has dulled the impulse to move things forward. There are other examples. Nova Scotia billionaire John Bragg, who founded Oxford Wild Blueberries and Bragg Communications, told<\/a> podcaster Shane Parrish last year that his family\u2019s investment portfolio includes \u201ca lot of Buffett,\u201d and that they had been considering an investment in a riskier company, but decided they\u2019d rather buy more shares in Berkshire Hathaway, Warren Buffet\u2019s publicly traded holding company. Why roll the dice when you can ride with one of history\u2019s greatest investors?\u00a0<\/p>\n

It\u2019s going to take a lot of coaxing to get private money to take the leap into the unknown. It\u2019s all the more reason for governments to keep doing what they\u2019re doing. They are going to have to light the way.\u00a0\u00a0<\/p>\n

Kevin Carmichael is The Logic\u2019s 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.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Normal is redefined on the regular these days, but what goes up still comes down. Those charts of…\n","protected":false},"author":2,"featured_media":8013,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[49,48,8515,1376,46,44,3658,8516],"class_list":{"0":"post-8012","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-canada","8":"tag-ca","9":"tag-canada","10":"tag-comment","11":"tag-donald-trump","12":"tag-economy","13":"tag-news","14":"tag-risk","15":"tag-stephen-poloz"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/8012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=8012"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/8012\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/8013"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=8012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=8012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=8012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}