We face a turning point in history.
Authoritarian states like Russia, China, Iran, and North Korea are emboldened.
The free world has long been economically stagnant and geopolitically naive.
The global economy is undergoing unprecedented shifts, with artificial intelligence set to reshape work and wealth.
Free and open trade is under assault, an assault led in large part by the country that ushered in the global trading order – the United States of America.
Canada’s economy, built for a world of open trade, stability, and peace, is struggling, with per capita GDP growth falling behind many of our peers, and tariff threats putting many of our core industries – auto, steel, and aluminum – at risk.
As a result, Canada’s prosperity and sovereignty depend upon addressing these issues, and addressing them fast.
Canada needs to find a way to drive technological development, defend ourselves from potential adversaries, and protect core industries.
Can this be done simply by ‘letting the market work?’
Unfortunately not.
The market matters, but so does government
Military investment is often ‘inefficient’ from a pure market perspective. Why spend money on weapons and equipment that may never be used?
The same goes for defending core industries when those industries are under threat. If left to its own devices, the global market doesn’t care whether Canada has a strong tech sector, aerospace sector, defence sector, oil & gas sector, auto sector, and steel & aluminum sector.
But Canadians should care.
We should care because the future of our country and the maintenance of our sovereignty depend on our country having certain capabilities.
And if the market won’t support those capabilities, the government must step in.
Consider it this way:
The market would generally prefer to see Canada wholly dependent on large American tech companies, defence companies, space companies, steel companies, aluminum companies, and more, rather than developing our own.
Were Canada to remain in that position, we would be increasingly vulnerable and unable to chart our own course.
Thus, government action is necessary to stabilize those industries in Canada and incentivize investment in those industries.
Defence spending offers one of the best ways to make this happen.
The defence dividend
Consider what a massive investment in defence spending would mean if it were largely directed at domestic firms.
Canadian drone manufacturers would rapidly scale up. AI and quantum computing companies would be supported. Even amid U.S. trade threats, Canadian autoworkers could benefit from a shift toward defence production. Canadian steel and aluminum firms would be protected through military contracts, building ships, artillery, small arms, and more with Canadian materials. Canada would become a country with independent space launch capability, launching Canadian-made rockets from Canadian-owned spaceports. We would develop hypersonic weapons and drones at scale, helping secure our sovereignty and make a better contribution to our alliances.
All of this will require initial government investment.
However, this should not be viewed as a binary choice. Initial government investment doesn’t preclude private sector investment. Rather, initial government investment to build up Canadian firms in key sectors, particularly defence, will draw in private investment, particularly when private investors are confident the government will stand behind those industries in the interest of national security and national defence.
We see this in many other advanced nations. Dassault in France, Boeing in the US, BAE in the UK, Rheinmetall in Germany, are among many examples of companies that attract significant private investment and contribute to the private economy, while also benefitting from significant government military contracts and implicit backing as ‘national champions’ that will not be allowed to fail. Those companies help ensure those nations retain key capabilities, create jobs, and incentivize technological advancement.
This is the approach Canada should emulate. Right now, we need to defend our sovereignty and kick-start our economy. A massive investment in our military is the most effective way to achieve both.
Spencer Fernando
If this piece left you clearer than it found you, that's the point. I write for readers who want to think past the week, to see the longer pattern beneath the daily story, and to come away steadier rather than more agitated.
That longer view gets built somewhere. On Patreon, essay by essay, I'm constructing The Long Work, a body of analysis meant to outlast the news cycle that prompted it. The readers there make it possible. No subsidies, no strings. The work answers to them.
$8/month to read it as it's built, and to have a hand in building it.