This was an election about Trump, but the new Prime Minister, Mark Carney, is likely to use deregulation and attacks on the working class as a solution to the trade war, argues John Clarke

On 28 April, Mark Carney and his Liberal Party emerged as the winners in a federal election that was dominated by the US-initiated trade war and the enormous impact it would have on the Canadian economy. The Liberals, with 169 seats, fell just short of the 172 they needed for a parliamentary majority, but it is hard to imagine any configuration of opposition parties that might come together in the immediate future to bring down the government.

For the Liberal Party, this result represents a remarkable change in political fortunes. Under the deeply unpopular Justin Trudeau, they were trailing badly behind the Conservatives, and a punishing defeat seemed all but inevitable. Even with Trudeau pushed aside to make way for Carney, Liberal prospects looked very bleak. It was undoubtedly Trump’s protectionist measures that transformed the situation, with the hard-right Tory leader, Pierre Poilievre, being perceived as too ideologically close to the US president.

The Conservatives failed to overcome this Liberal resurgence but they remain a strong political force, with 144 seats. Indeed, given the momentum that the Carney Liberals were able to generate, the Tory showing in the election was remarkably robust. This was nonetheless undermined by the fact that Poilievre lost his own seat and, while an elected MP will undoubtedly resign to make way for him, it was a stinging humiliation.

The NDP, Canada’s social-democratic party, paid the price for propping up the Liberals in parliament and moving to the political centre. Its failure to provide a strong alternative meant that large numbers of left-leaning voters backed the Carney Liberals, so as to shut out the Conservatives. The NDP lost 17 of the 24 seats it held in the last parliament and forfeited its official party status in the process. 

Team Canada

With the trade crisis casting its shadow over the election, it was undoubtedly Carney who best positioned himself to capitalise on the patriotic wave that has resulted from it. Since becoming Liberal leader and throughout the election, he has stressed the need to ‘stand up to a bully’ and has called for the Canadian economy to be reorganised so as to reduce its dependency on trade with the US. On 27 March, the BBC quoted Carney as suggesting that ‘Canada’s old relationship with the United States, “based on deepening integration of our economies and tight security and military cooperation, is over”.’

Carney went to considerable lengths to present himself as the patriotic captain of ‘Team Canada’, and this routine played a decisive role in reviving the political fortunes of the Liberal Party and keeping him in the Prime Minister’s office. Albeit without the parliamentary majority he would have wanted, Carney has the mandate he sought to direct the Canadian response to Trump’s tariffs and broader America First agenda. While the period ahead will be extremely volatile and uncertain, the approaches Carney is likely to take and the options he will pursue are fairly easy to discern.

Carney’s career has involved leading both the Bank of Canada and the Bank of England, as well as holding senior positions with powerful private companies, and he has presented himself as an effective steward of capitalist interests. A 10 March article by Associated Press was headlined, ‘Canada’s next prime minister has managed the financial crisis, Brexit and now Trump’s trade war.’ Stressing these qualifications, Carney has described the present trade war as ‘the biggest crisis of our lifetimes’ but the question arises of just how he intends to deal with it.

For Carney, weathering the trade-war storm is synonymous with ensuring that Canadian capitalism is preserved and stabilised. In this regard, there are a number of initiatives that can be pursued. For all his defiant rhetoric, the first of these will be an attempt to strike a deal with the Trump administration.

On 30 April, CTV News reported that Trump had announced that Carney, ‘who he called “a very nice gentleman”, will pay a visit to the White House “within the next week or less”.’ He added that Carney ‘called me up yesterday, he said, “let’s make a deal”.’ While Trump is hardly a trusted source, there is no doubt that such a meeting will take place very soon and that Carney will be anxious to see if terms can be reached that avert the crisis, even if quite substantial concessions are involved.

It is far from clear, however, that Trump will put any viable deal on the table, and his erratic style makes the durability of any such arrangement questionable. That being so, Carney must be ready to chart a course with US tariffs in place and in the face of a less-than-cooperative relationship with Washington. In this regard, he has signalled his intentions quite clearly.

Stabilising capitalism 

On 20 April, the Liberals released the election campaign platform and, in introducing it, Carney provided a sense of how his government will be ready to respond to inflexible US protectionism. He argued that Trump is ‘trying to fundamentally restructure the international trading system’ and in the process is ‘rupturing the global economy’. He then, very tellingly, suggested that ‘to succeed in a crisis, you have to act with overwhelming force … In a crisis … the private sector retreats, and government needs to step up. Government must lead and catalyze private investment.’

Drawing on his considerable body of experience, Carney acknowledged that moments of crisis within capitalism require a highly interventionist state that can control disruptive factors and preserve profitability. Accordingly, he set out plans for billions of spending on the military as well as a ‘number of infrastructure initiatives — aimed at “nation-building” projects, trade corridors, digital infrastructure, health-care infrastructure, community infrastructure and projects in the Arctic.’

As I pointed out in an earlier article for Counterfire, we may expect a huge drive to deregulate protective standards for workers, consumers and the environment from the Carney government and a considerable emphasis to be placed on environmentally destructive resource-extraction projects. Moreover, during the campaign, NDP Leader Jagmeet Singh suggested that Carney’s plan to balance the federal government’s operating budget would involve spending cuts of some $43 billion over the next three years. 

The course that Carney is following is certainly in line with the thinking of the major capitalist institutions, including the Royal Bank of Canada (RBC). A statement issued by the RBC offers an appraisal of the trade crisis and some suggested remedies that differ very little from the ideas that Carney put forward on the campaign trail.

The statement begins by asserting that ‘Canada is at a crossroads. It’s facing a shifting relationship with its main economic partner, a reawakening to its forgotten growth potential, and questions about its place in a new and developing global supply chain.’ It notes that an economic downturn is likely in the face of a trade crisis and argues that ‘fiscal policy will have to focus on reviving a sad economic development. Potential growth – a combination of labour force participation and productivity – is expected to fall below 1% at current rates.’

The RBC argues that ‘Canada’s productivity crisis, including lagging business investment relative to peer economies’ will have to be addressed and calls for responses that include ‘cutting red tape to reducing interprovincial trade barriers to generating innovation’ in order to create a ‘more competitive ecosphere.’

The statement includes a section that calls for a ‘rebalancing of focus between social and business investment measures.’ Leaving no doubt on this score, it complains that ‘Canadians have benefited from a permanent expansion in federal government spending on often broad-based social programs without absorbing the costs.’

The response to this alleged imbalance is, in the view of the RBC, proper attention to ‘the need to encourage greater wealth drivers in the Canadian economy amid shifting economic and geopolitical forces.’ It isn’t at all hostile to government spending, but it insists that it must be focused on ‘public spending [that] delivers greater growth dividends.’

When Carney argues that government ‘must lead and catalyze private investment’, he is making essentially the same argument as the leading figures at the RBC, with whom he is no doubt on first-name terms. The Liberal Party has secured an electoral mandate and it will use it to ruthlessly impose the burden of the trade crisis on the working class, as it seeks to preserve profits, increase ‘competitiveness’ and secure new trading partners. The building of a united movement to resist and defeat this attack will be of decisive importance in the months ahead.