Trudeau’s Finance Chief Chooses Words Carefully in Growth Chase

  • Morneau has two-track focus as Canada struggles to escape rut
  • Unlike predecessors, he doesn’t talk debt or balanced budgets

Bill Morneau.

Photographer: Brent Lewin/Bloomberg

Bill Morneau has growth -- and all its iterations -- on the mind.

The former chief executive of Morneau Shepell Inc. was tasked by Prime Minister Justin Trudeau last year with altering Canada’s growth trajectory. That’s no easy feat with the country’s economy mired in one of its worst-ever ruts outside a recession

Morneau attends a news conference in Beijing, on Aug. 31.

Photographer: Adrian Wyld/The Canadian Press via AP Photo

In a 45-minute interview last week over breakfast in Hong Kong, the rookie finance minister spoke of short-term growth, long-term growth, global growth, enhanced growth, the fruits of growth, and most emphatically about inclusive growth. His advisory panel, which he calls the growth council, is working on a growth agenda.

“We need to be consciously focused on the efforts that we can collectively do to increase growth, and consciously thinking about how that growth results in better outcomes,” said Morneau, who was in China as part of Trudeau’s week-long visit to the Asian country.

Even more remarkable for a Canadian finance minister is what Morneau doesn’t talk about. Not once did he utter the words deficit, debt or balanced budget. Even budget is used sparingly: twice in 45 minutes, replaced in his vernacular by investment.

Rhetorical Shift

It’s hard to understate the transformation. Canadian finance ministers have had a laser-like focus on the nation’s fiscal track, at least rhetorically, for three decades -- an era when deficits, inflation and taxes were seen as the biggest obstacles to growth and the best thing government could do for the economy was keep out of it.

Yet, none of Morneau’s predecessors faced this kind of challenge. In the two years through the second quarter of 2016, the economy expanded just 1.9 percent. That’s the slowest two-year pace outside an outright recession since at least World War II, according to Statistics Canada data.

Nor is Canada alone, with economic stagnation now the No. 1 concern for policy makers throughout the developed world. Growth is on everyone’s mind and everybody is looking for solutions.

The previous Conservative administration under Stephen Harper used structural tools to drive growth, such as labor-market reforms and trade liberalization. Fiscal policy was largely relegated to balancing the budget.

Activist Plan

What distinguishes Trudeau is the extent to which he’s willing to put government at the center of the agenda.

Canada is ramping up benefits to just about everyone -- veterans, the unemployed, aboriginals and families -- while allocating billions more in infrastructure and topping up climate-change funding. It will cost almost C$120 billion ($92 billion) in cumulative deficits over the next five years.

Trudeau’s Liberals also negotiated the expansion of Canada’s employer-financed pension system and cut the age of eligibility for its government-financed seniors program. Their main idea is to make sure benefits are widely spread, Morneau said, noting the agenda has two parts: “The inclusive part and the growth part.” 

Making sure the recovery is inclusive is particularly important since it helps keep families engaged in the economy, he said. The handouts, meanwhile, provide an immediate boost to household confidence, allowing the economy’s “flywheel to spin faster.” Plus they buy government time to put together a longer-term growth plan.

Global Example

“We need to provide real benefits for people and then we have to recognize the only way we can do it over the long term is by actually enhancing our growth,” the finance minister said.

To Morneau, who took up his post last fall, Canada has been a leader on this front at the Group of 20. “Within a span of that year what we are talking about has gone from being very interesting to our colleagues around the table to critical to their view,” he said.

Trudeau took a big risk in putting the rookie lawmaker in charge of Canada’s treasury. A finance minister’s job, after all, is supposed to be about saying no to powerful cabinet colleagues and keeping a steady hand on the tiller.

But with monetary policy losing its bite and populist sentiment threatening trade, it’s hardly business as usual for the world’s finance ministers.

Biggest Test

While Morneau spends a lot of time talking up the inclusive part of the equation, the growth part will be his biggest test. The starting premise -- that tens of billions in income can suddenly appear out of nowhere if only policy makers are more active --  is audacious. It not only requires a belief that government is a force of good, but also implies faith in government’s ability to come up with complex solutions to complex problems.

Which probably explains why Morneau is finance minister.

While he lacks political experience, he has one skill in short supply for an administration keen on rebooting the machinery of government: he has successfully run a large, complex organization. And he’s taking that role seriously.

Think of him as the minister of the economic-policy nervous system -- gathering information, coordinating with cabinet and the prime minister’s office, and influencing decisions -- rather than as an ideologue driving his own agenda.

Modus Operandi

It’s a management style Morneau honed as chief executive of one of the country’s largest human-resource companies. It also dovetails with Trudeau’s own efforts to change the tone and tenor of government into something more collaborative and open.

“We’re going to make an impact as a product of teamwork,” he said. “I see my role as an important member of the team.”

Morneau will also certainly play the finance minister’s traditional role. He is the pro-business voice of fiscal prudence at the cabinet table in an activist government taking on social and environmental issues. Batting back ministers and tempering ambitions may still end up being one of his biggest contributions to growth.

“We know that government can have an impact by directing our resources in the most positive way,” Morneau said. “We also recognize that it’s the tens of thousands of decisions of individuals and companies to make investments in a better future that improve all of our economic outcomes.”

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