At Issue: In Canada, we need to create a hedge against boom-and-bust economies and an alternative to supply-side economics (aka “trickle-down economics”; “Voodoo Economics”) for a much longer term growth strategy where the middle class can benefit.

Canada needs a new vision for building sustainable growth. The strategy of lowering taxes to stimulate the economy may yield short-term gains, but it fails to address long-term economic stability. Boom-and-bust cycles continue to dominate our economy, leaving us with privatized gains during prosperous times and socialized losses during downturns. This dynamic erodes government revenue, exacerbates deficits, and ultimately places the burden on the middle class. The result? Reduced funding for the essential programs and services that underpin a strong and vibrant Canada.

While tax cuts can stimulate growth, they must be paired with mechanisms that sustain this growth through economic fluctuations. One such mechanism is the creation of a Canadian Sovereign Wealth Fund. This isn’t simply about taxing the wealthy; it’s about strategically reinvesting a portion of our economic successes to build a robust foundation for long-term prosperity. A sovereign wealth fund could serve as a buffer against economic volatility while fostering small business development and supporting critical programs like healthcare, which keeps Canadians healthy and productive.

Here’s how it could work: for every ounce of minerals or energy extracted from the earth, a modest 2% royalty could be directed into the fund. Similarly, when major Canadian businesses are sold to private equity firms, 1-2% of the proceeds or equity stake could be retained to contribute to the fund. Over time, this approach would generate significant capital that could be strategically invested both domestically and internationally.

Beyond its defensive role, the fund could go on the offensive. For example, consider the sale of the C Series jet program to Airbus. By rights, Canada should have retained an ownership stake in Airbus as part of that transaction. The Quebec government understood this principle, securing a small share in the A220 jet program when Bombardier partnered with Airbus. Why aren’t we adopting this approach on a national scale?

A sovereign wealth fund would not only strengthen Canada’s economy but also align with our values of fairness, sustainability, and shared prosperity. It’s time to move beyond short-term fixes and build an enduring framework for economic stability and growth—one that benefits all Canadians.

This proposal is far from fanciful—it’s a bold and forward-thinking approach that draws on proven successes seen in other nations, such as Norway’s Government Pension Fund Global and Alaska’s Permanent Fund. Establishing a Canadian Sovereign Wealth Fund (SWF) offers clear benefits, but it also faces significant challenges.

Strengths and Benefits

1. Economic Stability:
   An SWF could act as a buffer against boom-and-bust cycles, ensuring that windfall revenues from resources or major transactions are preserved and reinvested for the long-term benefit of all Canadians.
   
2. Broad-Based Prosperity:
   By funding critical infrastructure, healthcare, and small business initiatives, the SWF could help secure a vibrant middle class and reduce economic inequality.
   
3. Investment Opportunities:
   Strategic domestic and international investments by the fund could diversify Canada’s income sources, reduce reliance on resource extraction, and foster innovation and green energy projects.
   
4. Global Influence:
   Leveraging a fund for equity stakes in multinational corporations or major industries could increase Canada’s standing in the global economy and offer long-term dividends.

Challenges

1. Political Feasibility:
   The biggest hurdle is the political will to create and sustain such a fund. Politicians often prioritize short-term gains over long-term planning, and the SWF’s establishment may require significant bipartisan cooperation and public buy-in.
   
2. Public Perception:
   The idea of diverting even a modest percentage of revenues to a fund might face resistance, particularly if it’s perceived as taking away immediate economic benefits.
   
3. Business Concerns:
   Resource and private equity firms might resist additional royalties or fees, arguing that these measures could deter investment. Balancing the fund’s goals with maintaining a competitive business environment will be critical.
   
4. Management Risks:
   Poor governance or politically motivated investment decisions could jeopardize the fund’s success. Transparent and accountable management structures are vital.

Will It Benefit Both Business and Citizens?

Absolutely—if designed well. A sovereign wealth fund can provide businesses with more stable economic conditions and opportunities for government-backed investment, particularly in infrastructure and innovation. For citizens, the fund ensures that resource wealth is reinvested into their future, helping sustain public services and reduce tax burdens over time.

Overcoming the Barriers

The key lies in framing the SWF as an investment in Canada’s future. Public and political support can be rallied by emphasizing the fund’s ability to:

• Mitigate the risks of economic downturns.
• Create a safety net for future generations.
• Foster a more equitable economy.

Countries with successful SWFs have shown that this model is not only viable but transformative when backed by sound policy and governance. Your proposal, with its focus on sustainability and shared prosperity, has the potential to be a cornerstone of Canadian economic strategy—if leaders and the public can muster the vision and commitment to see it through.

Canada’s Real Wealth: Leadership

And finally, on paper, Canada is arguably one of the richest countries in the world on a per capita basis. However, to fully realize our potential, we must carefully navigate the complex interplay of political, social, environmental, cultural, and economic factors. Canada’s true opportunity lies in leveraging its resources strategically—prioritizing clean energy, high-value manufacturing, and innovation over mere resource extraction. This approach offers the chance to balance wealth generation with environmental responsibility and global leadership. What we need are strong leaders who can unite Canadians behind a bold vision that transcends political divides and builds the foundation for a long-term, prosperous future for the nation.