Are new Crown enterprises about to become fashionable again in Canada? Unexpected as that might have been just a few years ago and as novel as the prospect seems even now, the argument for new Crown enterprises needs to be made, and the circumstances are compelling.
The chain of events that triggered these thoughts began with COVID and Canada’s frantic search – and spending – to acquire mRNA vaccines quickly from the United States, followed by efforts to ensure a sufficient supply for subsequent rounds. Eventually, there were cries from commentators that we needed a vaccine producer of our own. Only the occasional person, largely unnoticed, reminded Canadians that we used to have a major vaccine producer, a world leader in fact: publicly owned Connaught Laboratories.
Connaught was one of the greatest science, pharmaceutical and public-health stories ever – an international as well as a Canadian story. It is best known for its development and production of insulin, led by Frederick Banting and Charles Best, and for maintaining availability at the lowest possible cost, but that was only one of a long list of initiatives: tetanus antitoxin, badly needed by Canadian troops in World War I; diphtheria antitoxin and then vaccine; purification of the blood anticoagulant heparin, laying the foundation for many complex surgeries; World War II initiatives including the purification and mass production of penicillin and freeze-dried serum for blood transfusions; a key role in the development and production of the Salk polio vaccine; smallpox vaccine production (and world leadership in eliminating smallpox globally); and much more. Connaught also shared its findings and rigorous production methods widely.
It was privatized in 1986. It is now just a minor subsidiary of a French multinational.¹
Then, as the COVID pandemic was subsiding, U.S. President Joe Biden began handing out trillions of dollars to help the American economy. The largest part of the outlay was for infrastructure, but a no less important part, including the $280 billion (USD) Chips and Science Act, went into manufacturing and technological capabilities, notably semiconductor research and fabrication; $40 billion of the total went directly to semiconductor makers. Electric vehicle chargers, transmission lines, broadband development and small businesses and restaurants (a mere $75 billion) were given capital boosts.
The automobile industry similarly benefited, including a few billion dollars here and there for conversion to EV production and for EV batteries. The largest outlay, an indirect one to be paid by car buyers, was a 100 per cent tariff wall against Chinese EVs – a potentially gigantic subsidy for GM, Ford, and others, not to mention U.S. Tesla.
The private-enterprise USA wasn’t so sanctimoniously private-enterprise after all.
Prime Minister Justin Trudeau and the Ontario and Quebec governments followed with allocations to the EV supply chain, mostly for batteries, amounting to $52.5 billion (CAD). Almost all of that went to foreign companies like Stellantis and Volkswagen instead of to Canadian enterprises.
If we’re spending public money by the truckload, or the freight-train-load, I thought to myself, why not do so with enterprises of our own where we capture all of the benefits of ownership, including the multiplying wealth of patents? The large government role in the United States, particularly in terms of investment dollars and strategic purpose, undermines the right-wing ideological criticism that government should not be involved. The criticism was always bogus and ideologically self-serving in any case. New Crown enterprise, moreover, has the advantage of the equity and income flows being in public hands.
Times have suddenly changed. We are no longer in the 1980s. We are now entering a historic space where the creative public-enterprise stream in Canada can again be given room to breathe.
Another historical trend is also at play: the decline of the Canadian economy relative to our peers. Private business enterprise in Canada is flagging. According to the International Monetary Fund’s data, we’ve fallen from 15th place in GDP per capita at purchasing power parity in 1986 to 27th, projected for 2025, despite our oil and other natural resource revenues. Relative to U.S. GDP per capita, Canada’s GDP per capita has fallen from 89 per cent to 72 per cent in the same period. A 2021 OECD study, meanwhile, ranks our long-term GDP growth last among the organization’s 38 members. Although long-range projections are highly speculative, we have so far followed that trajectory. And this was before the recently announced Trump tariffs.
And the ultimate insult: The Economist last fall pointed out that Canada, on a per capita basis, had gone from being slightly richer than Montana, the ninth poorest American state, in 2019 to being worse off than Alabama, the fourth poorest state, in 2024.
The 40-year relative decline, by the way, coincides with the privatization wave of the 1980s and 1990s and its right-wing ideological framing.
Every business commentator and their dog now barks that we need to raise our productivity. The woeful level of corporate spending on research and development is mentioned yet again. It’s an old story. And indeed, while the OECD average of “Business Enterprise Research and Development,” or BERD in the jargon, has risen impressively in the last 20 years, Canada’s BERD as a percentage of GDP has declined to the point where it is now less than half the OECD average. Inadequate capital investment in machinery and equipment is also mentioned – another old story.
The stagnant per capita GDP figure takes a toll on everything, including the tax base for financing our high level of health services, education and other public programs, which in turn means endlessly rising public debt.
If that weren’t enough, along comes the Donald Trump tornado, a perfect storm in itself. Trump has shifted more than just our trade picture. We can scoff all we want at Trump’s narcissistic blather about making Canada his 51st state, but behind the bluster is another intimation – that Canada is economically weak and so isn’t important enough to be a separate country next to the powerhouse United States. That intimation touches us, for while we’re an economically developed, well-educated, infrastructure-strong and tech-savvy country compared to most others in the world, we’re in the Americans’ shadow and, to a significant extent, in their hands – tariffs aside.
Take the stock market’s Seven Samurai: Apple, Amazon, Alphabet (Google), Meta (Facebook, Instagram), Microsoft, Nvidia and Tesla. They’ve long since invaded Canada and taken possession of us in our daily lives. Or take the Stargate consortium – Oracle, OpenAI and Softbank (partially Japanese through its principal shareholder) – launching a half-trillion-dollar (USD) data-centre project. How does Canadian business stand up or compare to that?
Trump has made us realize that if we’re to maintain any real independence from the United States, for which read economic competitiveness vis-à-vis the United States, we’re in an existential struggle. We are being compelled to defend ourselves against American economic power.
Defensive expansionism redux
This is not, in fact, anything new. It just seems that way because of the integrationist drift we’ve been part of in the last 30 or 40 years. Keeping up with the United States economically to keep ourselves separate from the United States goes back to before Canada was a country. Because of the vastly larger American market, moreover, it meant doing things differently from the Americans, including entrepreneurially. One of these alternative approaches has been the use of Crown corporations or their equivalents.
I date the beginning of the Canadian public-enterprise stream back to the construction of the Lachine Canal (circa 1821–25, in response to the building of the Erie Canal south of the border) and the Rideau Canal (for military purposes, fallout from the War of 1812). Then came the Canadian Pacific Railway (nationally planned and effectively underwritten by government land grants and bond guarantees, although not a public enterprise per se) to tie British Columbia into Confederation and keep the west out of American hands.
Ontario Hydro followed in 1906, with one of its objectives being to supply the cheapest possible electric power to southern Ontario’s manufacturing sector and keep pace with the United States. The driving force behind Ontario Hydro, Adam Beck, was a small manufacturer himself. Then came Canadian National Railways, the CBC (to head off plans by NBC and CBS to take over Canadian radio territory), the Canadian Wheat Board, Trans-Canada Air Lines, Atomic Energy of Canada and, later, Petro-Canada. University of Toronto historian Hugh Aitken dubbed the entire historical context of these public enterprises, save for Petro-Canada which emerged later, “defensive expansionism.”
Then there were the provincial Crown corporations with their own regional dynamics: the prairie provinces’ telephone companies, B.C. Hydro, B.C. Ferries, Saskatchewan Power, the Saskatchewan Potash Corporation, Manitoba Hydro, the automobile insurance companies in Saskatchewan, Manitoba, British Columbia, and Quebec, and the most significant of them, Hydro-Québec. They too played a role in Canada’s competitiveness.
Fast forward to today. All of a sudden, the strategic ethos of defensive expansionism is back. We’re scrambling to defend ourselves economically against the United States, or rather scrambling to figure out how to do so. It’s defensive expansionism redux or, as Yogi Berra would say, “déjà vu all over again.”
Without a broad opening for new Crown companies, however, we’re fighting with one arm tied behind our back. The wave of privatizations – CN, Air Canada, the Potash Corporation of Saskatchewan, the Alberta and Manitoba telephone systems and Petro-Canada – hasn’t helped, but the critical weakening factor for the Canadian economy was the ideological one, pushing the idea of new Crown enterprise out of the political frame.
We’re consequently left, in this new economic war in which we find ourselves, with nonsolutions – more pipelines, speeding up mining development, eliminating much-exaggerated interprovincial trade and labour barriers, diversifying export markets, reducing red tape (that old nostrum) – all of which is more of the same and ignores the key issues which are ownership, enterprise, productivity and innovation.
How do you get the radical improvement needed from the so-called private sector, including private-equity firms, hedge funds and the like, when they have had an open field all along: when they’ve already been gifted with seemingly endless subsidy programs to boost technological innovation, programs that are easily scammed. Lowering the corporate tax rate and other tax concessions have been tried as well; beseeching the private sector to boost forward-looking investment seems only to lead to more pleading and more handouts.
None of these approaches addresses the singular phenomenon we’ve faced, uniquely, since manufacturing exploded in the United States during the Civil War in the 1860s to supply the Union army – the osmotic drawing power of the American economy and the American market next door. This power affects location, investment and the ownership of Canadian companies open to buyouts.
Equally potent is the model of American enterprise and its commercial success, imposing itself on our minds to the point of excluding other possibilities, although we’re a different country in a quite different situation. The current fashionable model is the high-tech innovator who ends up a billionaire. Crown enterprise, which by contrast is community-centred, cuts across all that and brings a powerful entrepreneurial stream of its own into play.
The single-minded, acquisitive individualist, the mythic paragon of American capitalism, is only one kind of entrepreneur, and far from being an ideal model. Acquisitiveness, I wrote in a chapter on community-centred enterprise in my book The Privatization Putsch,
is a limited motor of entrepreneurial creativity and is often destructive of entrepreneurship. The major factors of entrepreneurial creativity are personal and social pride and the sheer zest and satisfaction of practical striving and invention – these in turn coming from achievement, building, creating, excelling, winning in competition, contributing to one’s community and even to mankind.
We found this out when we needed to defeat a military enemy in World War II. In an extraordinary entrepreneurial demonstration, Canada created 28 Crown corporations including the Victory Aircraft plant; Polymer Corporation, an advanced synthetic rubber complex; and Research Enterprises (optical instruments, periscopes, range finders, telescopic sights, radio sets and radar).
And we’re reportedly in a war of a sort now too. Keeping Canada independent of – and competitive with – the United States is as good an economic motivator as any. Economic nationalism, or regionalism, can be a dynamic and creative force.
Approaching possibilities in Canadian terms
In wartime or peacetime, a Crown enterprise offers several advantages. It draws on the broad impulse of community and its values, and so draws on commitment and imagination accordingly. It understands the importance of holding onto ownership, which means holding onto the future, rather than selling out for a payoff from a larger outfit, usually an American one. Most of all, it means approaching possibilities in Canadian terms, independent of the myths, ideology, assumptions and icons of American business.
My favourite historical example is Trans-Canada Air Lines (TCA), which later morphed into Air Canada. TCA was established in response to unique Canadian circumstances, rather than imitating the U.S. industry. This meant a single carrier, a monopoly, that could optimally integrate flights, equipment and the route network. It ended up doing what was thought almost impossible: it matched and, in some respects, outdid U.S. airlines in service and fares, with just a fraction of U.S. traffic densities. It was also a technical leader.
Rather than market competition, TCA faced benchmark competition against the performance of U.S. airlines. Given the pressure to provide Canada with comparable airline service against the odds, not to mention the pressure of overcoming ideological prejudice against it because it wasn’t American private enterprise, the benchmark competition was at least as powerful an impetus as market competition. Even when the monopoly model was gradually broken up by a combination of lobbying and appeals to “free-enterprise” ideology, TCA, now Air Canada, continued to excel.²
Provincially owned automobile insurance companies have done something similar by taking advantage of economies of scale and integration made possible by their monopoly coverage of all drivers. Their expense ratios, consequently, are considerably below those of private auto insurance operations in other provinces. Profits also stay at home, as does investment revenue from reserves – reserves which, in automobile insurance, are a multiple of annual premiums. Public automobile insurance is one of the great retail innovations in Canadian business history.
Crown ownership also allows for optimizing the return on public investment in research, for example university biomedical research, by directly creating an enterprise when the research shows promising results or feeding an existing enterprise with the findings, instead of licensing out the use of the discoveries. Remember that Connaught Laboratories, from its beginnings through most of its history in public hands, was owned by the University of Toronto.
Crown enterprise is also, by far, the best vehicle for capturing the wealth of natural resources (leaving aside questions of whether some of those resources, such as the oil sands, should be extracted from the ground or not). If there are no Crown participants in any sector, the private companies that dominate the sector – by control of investment, jobs and operations and by lobbying, public relations (politicking in effect), political friends and regulatory capture – can whipsaw governments into lowering royalty rates and making other concessions, and can otherwise boost margins, sometimes dramatically when markets spike. In practice, it becomes impossible for the public to collect proper “rents” for their resources. An egregious example is Saskatchewan potash – both the struggle which led to the creation of the Crown-owned Potash Corporation of Saskatchewan and the business folly of its ideologically motivated privatization.³
Unlike Margaret Thatcher’s privatizing British Gas and Britoil (a North Sea Cinderella) although they were highly profitable (indeed because they were highly profitable), Norway held on to its ownership of Statoil. The surplus revenue of Statoil (now Equinor, in a modified ownership form) goes into Norway’s Government Pension Fund Global, otherwise known as the Oil Fund. Its assets, as of March 2025, were $2.487 trillion (CAD), the largest single sovereign wealth fund in the world.
Alberta’s equivalent, the Alberta Heritage Savings Trust Fund, which wasn’t given the strategic priority of the Norwegian fund, was $25 billion (CAD) at the end of 2024, or 1 per cent of Norway’s fund.
Those examples all on their own underscore the critical importance of ownership and control, all the more worth noting for the future with critical minerals and possibly water in play. Donald Trump’s attempt to appropriate Ukraine’s critical minerals underscores the point. Ownership brings with it profits, the benefits of expansion, spinoffs and innovation and, through retained earnings, accumulating assets.
A different world
This brings us to the present day, a different world, with global warming and the rise of digital technology now in the forefront.
I’ll limit myself to two broad guidelines for new Crown enterprise in Canada. The first is to open the door wide to its entrepreneurial advantages, including its participation in market sectors. The notion that Crown enterprise should be limited to monopoly, utility or quasi-government functions is an artificial ideological construct, especially when it comes to offsetting oligopoly power. Crown ownership and cooperative ownership (think of credit unions) bring different cultures and social imagination to – and hence enhance – markets. Even where their leeway is constrained because of market pressures and they behave much like others – as Petro-Canada did before it was privatized – they can provide a check on market abuse.
Openness to participation in markets is especially important where an existing Crown corporation’s knowledge base lends itself to creating new work out of old, and the new work is in an open market. The culture of Crown corporations should encourage spinoffs as either subsidiaries or new Crowns. Otherwise, the company’s imagination and talent are being tied into a straitjacket and wasted.
My second guideline is to harness Canadians’ sense of identity through new Crown companies in ways that Canadian private ownership can’t manage because its lead objectives stem from a different premise. Draw on our non-American social imagination and our different, non-American way of doing things (like universal medical care). Striking back at U.S. economic dominance and the rise of its corporate oligarchs is enough of an incentive to get one’s imagination going.
Those oligarchs’ power, in the digital economy in particular, is compounding. “Big Tech continues to consolidate its power globally over and above that of nation states,” writes American technology journalist Tom Valovic, “as democratic principles slowly vaporize even in Western nations.” The development of AI, which is sometimes described as an “arms race,” will only add to the trend.
Who knows what we can do to contend, and what new ventures will be created and make a difference, once the shackles are taken off the Crown-enterprise entrepreneurial stream?
Notes
¹ For the full story of Connaught, see the applicable chapter in Linda McQuaig, The Sport and Prey of Capitalists: How the Rich are Stealing Canada’s Public Wealth (Toronto: Dundurn, 2019).
² For the full TCA story, see chapter 12 in my book The Privatization Putsch (Montreal: Institute for Research on Public Policy, 1989).
³ The whole sordid story is told in Eric Cline’s exposé of what transpired, Squandered: Canada’s Potash Legacy (Regina, SK: University of Regina Press, 2024). See also John Richards’s review of Cline’s book in Inroads, Winter/Spring 2025.
