This article originally appeared in The Hub.
By Mark Mancini, January 31, 2025
Five years into the 2020s, Canada is on the ropes. The reasons for this are inevitably complex. But only the most Pollyannish diehards would ignore the realities. A weak dollar, a health care system justified by only the memory of Tommy Douglas, and an unpredictable administration south of the border all present risks to the quality of life and well-being for Canadians as we glide along, politically rudderless. Expectations of U.S. tariffs over the weekend only reinforce the sense of forlorn that permeates our politics.
Former Conservative leader Erin O’Toole, in the face of some of these problems, has suggested that we need to “Make Canada Serious Again.” That means getting our own governmental house in order. We should get serious about Canada’s apparent state capacity deficit—the inability of the government to do its assigned tasks effectively.
Canadian governments should be acquainted with the idea that sustainable delivery of government programs depends on humility about the limits of public institutions. Recent calls for serious, public sector reform efforts in Canada by former Clerk of the Privy Council Michael Wernick and others should inspire us to pick up the baton and address the machinery of government.
In the 20th century, the public conversation centred around the relative size of government: should government be “big” or “small”? These are two labels that never made much sense except as slogans. Most agree that government should foster the conditions for economic development and social well-being in a world where citizens are increasingly isolated by online algorithms. But that it has a role to play does not mean that every proposal for a new program or bureaucracy—even those backed by the passion of ideology—should be actioned by public sector institutions.
Consider some recent examples—by no means exhaustive, and by no means limited to the current government.
The federal government embarked on an ambitious agenda designed to force web giants to subsidize Canadian content, simultaneously subjecting those platforms to CanCon regulations. The theory of the Online Streaming Act is that the internet ecosystem is like broadcasting and that classic tools of regulation can be adapted to that new reality. But Parliament failed to offer precise legal direction to the CRTC in exercising these powers, leading some observers to believe that user content—and the interests of users more generally—might be subject to future regulation by the CRTC. The contest between free expression and state interests, the stuff of parliamentary debate, was punted to the cloistered halls of regulatory hearings.
But does the CRTC have the capacity and knowledge to adjudicate the difficult moral, regulatory, and technical issues that this Robin Hood-like scheme invites? Observers opined, during debate on the Online Streaming Act, that the CRTC would simply not be able to handle the scope and breadth of its delegated task. And so far that appears to be the case.
Regulatory implementation of the bill is likely to continue past any future election into 2027—far past the end of 2024, when the CRTC warranted that the process would be “substantially complete.” Instead of asking whether an institutional re-jigging of the CRTC might be to accomplish what the act contemplated, the government barrelled ahead with its plan.
The story might be worse in the world of federal-provincial relations. Eric Lombardi is right when he calls “[o]ur federation a tangled mess of conditional transfers, tax gimmicks, and blurred lines of responsibility.” The federal government has insisted, for most of the 20th century, that provinces that wish to receive funding—say for health care—must follow certain rules. This has been extrapolated over many areas of regulatory endeavour. These arrangements betray the Constitution with a kiss. That is because the division of powers, historically understood, envisioned that the provinces and the federal government would have exclusive jurisdiction over their own domains. The provinces were granted extensive powers to legislate in areas where national collective action would be difficult or impossible, and where a government closest to the people should be responsible and most able.
The federal government’s expansive stretch into provincial jurisdiction was evidently inattentive to the limits of its state capacity and unintended consequences. The federal government signed bilateral agreements with the provinces, backed by $30 billion in spending over five years, to establish national government-regulated child care at an average cost of $10 per day. The slogan was impressive: a national, universal, child care system. But because the federal government holds the purse strings, it has downloaded administrative costs and burdens to the provinces and providers.
This is an inevitable consequence of its policy choice to force the provinces’ hand without asking whether the federal government should be in the daycare business at all. At any rate, it appears that we are far from the promised land of universal and accessible child care.
These examples, isolated as they are, only point to broader trends. Despite the fact that the size of the federal public sector has increased by around 40 percent since 2015, so has the government’s spending on private consultants and special services.
The story is undoubtedly more complex because real reform would take political capital, and reform can be a double-edged sword. The rocky start to the DOGE effort in the U.S. is proof positive of this. For us in Canada, some of the problems are structurally embedded in our bureaucratic institutions. As Wernick explains in his work, cumbersome procurement processes and a management-heavy federal government isolated in Ottawa from its growing presence in the provinces might present meaningful obstacles to reform. Worse, high levels of public sector unionization might discourage experimentation with new models of delivery.
Nonetheless, people of all political persuasions should care about state capacity. Those who see an active role for public sector institutions should care about the sustainability and limits of those institutions over the long run. Those who may reflexively oppose government could realize that much of the regulatory state is here to stay. Reform depends on a seriousness of purpose about what the state is for, what it does well, and what it could do better.
At any rate, Canada’s challenges in 2025 do not just come from a bloviating President Trump. The call is coming from inside the house. Canada is worth the fight, and a seriousness of purpose about our own country’s institutions is the best defence we can offer.