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Canada’s major challenges as it finds its way into the future

Canada has big things to think about, discuss and do on two major fronts.

As a country, we must get back to living within our means. Since 2008 we have accumulated massive current-account deficits financed by borrowing abroad in order to consume more than we earn, not to build the country.

Going forward, Canada has a huge set of advantages and vulnerabilities stemming from its unique varied assets that are in short supply globally.

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Two important factors have contributed to Canada's shortfall over the last decade: A failure to understand our mutual-accommodation strength and how we can use it, and the overall absence of needed business and political leadership on key economic policy challenges.

The coming decades will bring new choices that will determine Canada's role in a changing world of great peril and opportunity. In this world, working within limits may become as critical as pushing possibilities. Limits drive creativity. Canada's mutual-accommodation story is overwhelmingly one of creatively overcoming limits – in how we go about governing ourselves and living together.

The national focus since Confederation has been on consolidating the transcontinental nation formed by Sir John A. Macdonald, achieving independence from Great Britain and avoiding domination by the United States. The focus for the rest of this century will be more on what we want and need to do on our own behalf in a rapidly changing world. Will we have the resilient flexibility needed for this more externally focused task?

What if the 21st century is primarily about resources, creativity, innovation, governing diversity and achieving minimum levels of collective action? What if the population explosion, resource limits and climate change make management of the planet increasingly difficult? What if the demands of an inclusive global order prove too much for many important countries to handle? How might Canada then fit in? The current inclusive global order, ranged around the West, is becoming less global and less inclusive. The world faces a new, post-9/11 and post-Soviet collapse mutual-accommodation challenge that will increasingly test the stability of the several orders in the world. It must decide what kind of global, separate and differently-connected orders are needed going forward.

Canada should now be moving from a backwater to a global role. England in the early 16th century had a freedom, rule-of-law and constitutional-democracy gospel to spread. Canada today has a mutual-accommodation gospel to share. A stronger capacity for mutual accommodation is the only lasting way to achieve sustainable purpose in a crowded and stressed world. This gospel does not require occupation or military victory; it works only if voluntary. Force may be needed to keep the door open, but a lasting mutual accommodation has to be, in some realistic sense, better than the alternative.

Leadership in the long term

Canada needs a new generation of political and business leaders who can look beyond short-term votes and profits. Business was at the centre of shaping Canada's economic policy from 1984-2000 – a 15-year span of fiscal progress. Its absence since then has already begun to damage Canada's short-term future. In time, it will risk its long-term future, too. Business leadership in the narrow pursuit of its self-interest does not work (witness the last decade on the pipeline front), but business is needed to make things happen. Someone has to convey to politicians and public officials what drives the private sector. And the private sector has to be reminded of its social responsibility.

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Great leaders have the vision and the drive to look beyond their own personal interests and offer the community what is needed for economic progress, political stability and national security. Right now, there is little public-policy leadership from the business community, yet Canada's only real security is its economy. Canada needs a more broadly based and vibrant private sector. Our largely absent business leaders must rise to fill the current economic policy leadership vacuum and become more involved. Otherwise, other forces and interests will step in and take over.

Since 1980, markets and an ideology based on shareholder value have held a kind of moral authority among leadership elites across much of the business and economic community. However, as governments have failed to ensure the basic economic element of any free society – good-quality jobs and decent wages – their credibility and moral authority have begun to erode.

Moral authority comes to those who recognize the real issues in the world. A dysfunctional economy based on favouring Wall Street over Main Street is no substitute. The year 2013 marked the passing of one institutional leader of great moral authority, Nelson Mandela, and the arrival of another, the Pope – men who stand for an inclusive compassion. It also witnessed the courage of a young Pakistani girl, Malala Yousafzai, who stands without fear for the right of girls to be educated.

Challenges on the horizon

Canadians must start to think about and discuss their future. Staying the course of the last decade will not do it. Politics and political leaders are usually lagging indicators. Fresh policy leadership on competitive growth will almost certainly have to come from the private sector – journalists, academics and business people. It will also need public officials at their best.

The United States presents another challenge – domestically and globally as well as in its relationship with Canada. It has been clear since at least 2001 that the U.S. was having its own "George Kennan moment." As predicted by Mr. Kennan when he was in the U.S. embassy in Moscow in the late 1940s, the Soviet Union by 1989 had developed overreach challenges too great to overcome. Putin is now going down the same path, but with much less strength. Mr. Kennan saw that the Soviet takeover of Eastern European countries after the Second World War would have two results. First, at least some of those countries would try to break away – as happened almost immediately with the departure of the former Yugoslavia, and in 1956 with the unsuccessful Hungarian Revolution. Second, the Soviet Union would have insufficient public energy to address ongoing internal challenges on a timely basis.

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Around the turn of this century, the United States, the so-called winner of the Cold War, realized it would also have to withdraw from its geopolitical, economic and financial overreaches to ground it could hold. But unlike the former Soviet Union, it is doing so before it is too late. And it is already getting stronger. The post-9/11 geopolitical overreach and the post-Lehman Brothers near-collapses have seen these withdrawals get underway seriously. The fallout is an important part of what is disturbing the United States, inside and out. Retreats are rarely positive affairs. Friendly countries find they now resent the U.S. absence, where before they resented its presence.

This U.S. withdrawal shapes everything in the world today, including the game-changing positive factors about to reshape Canada. Big changes lie ahead in Canada-U.S. relations. A new era of political turmoil in the United States has emerged: The no-compromise Tea Party dominates the Congressional Republicans on fiscal issues and on social economic issues such as immigration. The U.S. no longer needs Canada in the same way it did during the Cold War, and it does not rely nearly as much on Canada for energy.

Canada still has many sources of potential leverage. It possesses many of the things that are increasingly in short supply in the world – space, a good neighbourhood and political, socio-cultural and institutional strengths – along with essential natural resources such as food, energy, water and minerals. It will soon be a country bordered by three navigable oceans.

This changing future will demand all of Canada's capacity for boldness, firmness of purpose and internal and external mutual accommodation. Until now, Canada has stood on the shoulders of other countries for much of what it has become and achieved. Now it must operate more independently in thinking and action at home and abroad. Every country in the world must change how it sees itself and goes about its affairs. Canada is no exception. What puts Canada in a different place from most is how much it has of what other countries want and need – its good neighbourhood and its mutual-accommodation advantage.

Seizing the moment

In a world of rising populations, climate change and resource pressures, does Canada have better long-term prospects than most people realize? If so, what should Canadians be doing right now?

Canada must think more for itself, if it is to protect and preserve what it has achieved. Canada developed into an independent country under the military protection of Britain and then the United States, but that is no longer what Canada will need most. As the United States is discovering in Afghanistan and the Middle East, overwhelming military strength at 30,000 feet does not translate into on-the-ground security.

In the future, Canada's best protection may well revolve around trade and immigration and a Canada-based economic policy that can drive a stronger competitive supply capability – two areas in which Canada already has solid experience. In addition, Canada's long history of mutual accommodation, ability to collaborate with others, practical "what works" approaches and small-country flexibility in the face of complex situations will all be to its advantage.

Canada could undergo two huge changes from climate change: An expanded area in its northern regions suitable for agriculture and comfortable human settlement, and the emergence of a third ocean – the Arctic – with new resources and sovereignty issues. So far, Canada's North has been more mythic than "real" – the "true North strong and free." In the near future, that North will need to be occupied, managed and protected well.

For the past century, Canada has lived in a good neighbourhood. It will now need to think seriously about how political turmoil in the United States and bordering on a third ocean could undermine that position. Canada cannot afford to allow any more of its resources to become hostage to a U.S. political system that is blocking measures simply for partisan advantage, independent of national interest.

The 21st century may well belong to Canada, in terms of everyday life for ordinary people, in much the way Wilfrid Laurier said the previous century would. Greater volatility and risk are in every country's collective future, but Canada can improve its chances by exploring developments that are most pertinent to us. Knowing more than other countries about what we see to be central for us and having better relevant relationships could make Canada, with its mutual accommodation culture and solid institutions, a haven of opportunity for good jobs and for wealth creation and protection. It could also provide increasing professional, creative and entrepreneurial opportunities for the best people in every field. They will be essential for a more productive and competitive non-resource and non-manufacturing-based Canadian economy.

How will Canada get from today's here to tomorrow's there? The United States is back as a reliable, forward-moving economy. Canada has lost momentum from its position of comparative advantage in 2012 and has yet to find a new path. The oil price collapse has caused major problems for the economy. The recent suggestion of drought in Western Canada could add to the challenge. Canada lacks policies to reward competitiveness in creating new job opportunities at a time when it is declining in its ability to attract the best people to establish themselves here.

The message for today's leaders in every field is simple: If you do not see Canada in a strong and long-term positive way and act on that basis, you cannot expect other Canadians, let alone the rest of the world, to see Canada that way.

Right now, Canada needs a far-ranging conversation that combines the best possible growth thinking with a bolder and higher aspirational performance bar – a new balance between big infrastructure and dynamic, knowledge-based entrepreneurship.

William A. Macdonald is president of W.A. Macdonald Associates Inc., which consults on government relations and economic policy, and has an extensive record of public service. To bolster his campaign to hold a nationwide conversation about the state and nature of the country, he and associate William R.K. Innes have created The Canadian Narrative Project, with assistance from Trent University. For more about the venture – and to see Mr. Macdonald's essay, Canada: Still the Unknown Country – please visit www.canadiandifference.ca

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