Since OBJ last went to press in December, the whole world has changed. At least it feels that way.
Few could have predicted the political drama that would unfold in the first three months of 2025, with all the twists and turns of a Tom Clancy thriller: the forced resignation of the prime minister, the U.S. president’s decision to initiate a tariff war and question Canada’s sovereignty, the confirmation of Mark Carney as leader of the Liberals, and a snap general election.
Pause here. Take a breath. That’s a lot.
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During the pandemic, most private-sector companies went through serious rationalization, everything was scrutinized, priorities were reset and teams restructured.
The public sector also experienced significant change during the health crisis, but in a different way. Billions of dollars in emergency spending were approved for urgent programs, causing the size of the public service to mushroom.
Not to oversimplify it, but business got lean and government got big. The stats are well known: a 26 per cent increase in federal government employees and a 34 per cent increase in federal government executives in about a decade.
With another economic crisis on our doorstep, the common refrain is that Ottawa will, as usual, be insulated. I think the other shoe is about to drop.
Retooling the national economy
How Canada evolves from this disruptive Trump administration is still unknown, but many things seem certain. The country’s priorities are about to suddenly shift as we retool the national economy.
There is a long and urgent list of to-dos: lowering interprovincial trade barriers, shifting our trade focus to Europe and Asia, expediting projects of national interest such as new pipelines and LNG plants, and gaining access to critical minerals. And don’t forget massive spending on defence.
As Sprott professor Ian Lee recently told OBJ, this retooling will require many billions of dollars in new investments, which is problematic given the size of the deficit. Tough spending choices are right around the corner.
Whether Carney or Pierre Polievre wins the general election, Ottawa should brace itself for an aggressive federal government program review. Hopefully that’s less like Elon Musk brandishing a chainsaw and more like the approach recommended by former clerk of the Privy Council Michael Wernick: a major structural overhaul, not a budget-cutting exercise.
Here’s the point.
A program review will likely end with tens of thousands of fewer public servants and that impact will be felt most right here in Ottawa. We don’t live in a steel town or a region dominated by auto manufacturers, but significant job losses are coming. They could easily eclipse the mid-1990s when Jean Chretien and Paul Martin chopped 55,000 positions.
Anyone who cares about the regional economy should start considering how Ottawa can adjust, as we wait for the other shoe to drop.
Michael Curran is the publisher of the Ottawa Business Journal.
