The Mark Carney government recently unveiled the Canada Strong Fund, seeded with $25 billion in initial capital, but the lack of details about it has also led to confusion and to many questions.

How will it be funded? Who will manage it? What do the retail investor participation and capital guarantees mean in practice?

These are legitimate questions and deserve answers, but they distract from the broader picture.

The fund is not just a financial instrument, it is a statement of economic philosophy. Ottawa is signalling that the era of passive government support that relies mostly on tax credits, subsidies and deregulation is changing. Canada is also reaching for something bolder and more direct: active state ownership as an engine of economic transformation.

Canada is hardly alone in this pivot. In Washington, the CHIPS Act pumped tens of billions of dollars into domestic semiconductor manufacturing. Import tariffs have been weaponized as instruments of economic statecraft. In Europe, green industrial strategies are reshaping energy and manufacturing. In China, the government has been actively part of the economy for decades, redirecting investment as it sees fit.

The Margaret Thatcher-Ronald Reagan consensus that markets allocate capital better than governments and that the state’s role is to step back is fraying at its edges.

The logic driving this shift is not difficult to understand. Tax credits and subsidies are blunt instruments. They lower the cost of investment, but governments have little control over where that investment ultimately flows or whether it generates the economic spillovers in terms of jobs, productivity and supply-chain linkages, that policymakers actually want.

Ownership, by contrast, gives the state something passive support does not provide: a seat at the table and a share of the upside.

The standard critique of government investment vehicles is that they prop up projects that are not viable under current market conditions. If a project needs the government’s financial support to get off the ground, the market is telling you it isn’t worth building, or so the argument goes.

The idea behind the fund pushes back against this criticism. The problem with many of Canada’s major projects, they contend, is not that they lack economic merit, but that they carry a risk profile that private capital judges too heavy to bear.

The capital requirements are enormous, the timelines are long and the approval and permitting process in this country has proven notoriously uncertain. The regulatory risk alone has killed many projects with genuine commercial logic.

This is where government involvement offers something genuinely distinctive. Government ownership does not just bring capital and financial de-risking; it brings political de-risking. Projects with Ottawa as a co-investor will be perceived as more likely to clear regulatory hurdles and less likely to be strangled by permitting delays.

That is not a market distortion so much as a recognition that the state created many of the risks it is now being asked to absorb. The Major Projects Office is the procedural complement to the fund’s financial firepower.

This is not nationalization or the creation of new Crown corporations. The fund’s aim is to be a minority participant, with day-to-day operations left to private-sector partners whose primary obligation is to generate returns. The goal is to crowd in private capital, not displace it, using the government’s de-risking to make the business case more compelling to the project’s proponents.

There is also a subtler ambition embedded in the fund’s design that deserves attention. For decades, Canada has suffered from poor productivity and competitiveness.

Enormous wealth has been generated by the energy sector over the past decades, but it has failed to lift productivity or competitiveness across the rest of the economy. The oil boom, in effect, masked the mediocrity of everything else. Resource wealth flowed into royalties, corporate profits and dividends to foreign shareholders; it did not seed a more diversified, innovative and competitive economy.

The fund offers a mechanism that could break this pattern. It is not a cash grab like a windfall tax on profits. Rather, it is the return the government receives for its participation and risk in various projects.

Reinvesting the fund’s returns into new projects rather than absorbing them into general revenues could make it a self-reinforcing vehicle to promote economic competitiveness and prosperity. This model is how Norway’s Government Pension Fund Global, built on oil revenues, became the world’s largest sovereign wealth fund. The parallel is widely imperfect, but the aspiration is laudable.

None of this means the fund will succeed. The size of the challenge faced is immense.

Let’s start with the capital problem: $25 billion is far from enough for the ambitions of the fund.

The federal government lacks a reliable stream of resource or trade revenue to organically grow the fund, something the Gulf states and Norway have relied on. The options on the table, whether attracting retail investors through a public participation program or inflows from the potential privatization of assets such as airports, will help at the margin, but are unlikely to bridge the gap between the fund’s current size and the scale of investment Canada rapidly needs.

But even if the fund deploys its capital well, the projects it finances will take years to generate returns. In the interim, the political pressure to deliver rapid results will be considerable. Arm’s-length governance is easy to promise, but could prove hard to protect. This is where Canada’s pension fund managers ‘ decades of expertise in infrastructure investment could be leveraged.

The fund will ultimately be judged not by its design, but by whether it catalyzes investment and whether it generates returns that compound into genuine economic capability. That is a high bar.

  • Canada must stop relying on consumers and focus on production
  • The K-shaped economy is real and labour is on the wrong end of it

But the deeper question is whether Canada can build big things again and turbocharge its economy. Major projects are an essential starting point, but they are unlikely to be sufficient to guarantee Canada’s long-term prosperity.

Charles St-Arnaud is chief economist at Servus Credit Union.