William Watson: Joe Biden delivers his State of the Continent address

U.S. President Joe Biden speaking during a news conference in Ottawa.

At times during his speech to Parliament last week, Joe Biden must have felt like he was giving another State of the Union address. People kept jumping up and down, as if doing callisthenics, cheering his applause lines, which mainly had to do with spending and overreach. Except it was better than the State of the Union: there was no heckling. And once, when the stodgy party on his left didn’t immediately stand and applaud the dubious proposition that federal cabinets should be 50-50 male-female (because, I suppose, it’s 2023), the president made them: “Even if you don’t agree, guys,” he told the Conservatives, “I’d stand up.” Which, sheepishly, they did. Freedom of speech has been threatened for some time in Canada, now so is freedom of sit. For a moment Biden knew what it was like to have the power of Putin or Xi.

In fact, it wasn’t so much a State of the Union as a State of the Continent address. The president explained, to a more than receptive audience, how the old rules of economics no longer apply, how North America needs its own supply chains , especially for semiconductors and electric cars, and how the “Inflation Reduction Act” — which is really a “Greenflation Production Act” — will spray subsidies far and wide to install green infrastructure and chip factories across the U.S. at a cost as high as tens of billions of dollars. That microscopically small transistors require such astronomically expensive factories is a bizarre corollary to Moore’s Law (R.I.P. Gordon Moore, who died last week).

Since the first weeks of the pandemic, and shortages of medical supplies — which in hindsight resolved themselves reasonably quickly — we’ve been told we need to secure our supply chains. First, it was to be by “friend-shoring,” which meant we wouldn’t in future rely so much on countries that might at some stage be hostile to us. China, Russia, North Korea, Iran and a few others would be out. Losing China would hurt but lots of places would still be in.

And then it was going to be “free-shoring” — trading mainly or maybe even only with democracies. Wikipedia says there are 24 “full democracies” (home to 14.4 per cent of humans), 48 “flawed democracies” (another 37.3 per cent) and 36 “hybrid regimes” (17.9 per cent), while only 59 countries, with 36.9 per cent of the world’s population, have “authoritarian regimes.” If we took an expansive view of democracy, that would leave almost two-thirds of the world’s population to trade with.

But now it seems we’re doing continental supply chains. True, if you have to choose a country to get into a fortress with, the U.S., for many reasons, would be your first choice. But do we really want to cut our supply chains with friends in Europe and Asia? And if North America does its own semiconductors, does Taiwan then become expendable? Do we tell President Xi, or will he figure that out for himself?

I’m not sure everyone in Ottawa caught the full detail of how the president thinks about continentalism. At the joint press conference following his speech he extemporized on the two countries’ very specialized roles in the new continental division of labour: “(W)e greatly need Canada, in terms of the minerals that are needed. Well, you guys — we don’t have the minerals to mine. You can mine them. You don’t want to produce — I mean, you know, turn them into product. We do . I mean, it’s — I’m a little confused, at least thus far, on why this is a disadvantage — for Canada and the United States. I think we have what each other needs.” (If you’re wondering, that’s the official White House transcript , with italics added by me.)

“Hewers of wood. Drawers of water. Miners of strategic ores.” If he’d said that in his address, he might well have been heckled. The NDP are always insisting we should add value to our natural resources before exporting them — by legislating to make that happen if that’s what it takes. Industry Minister François-Philippe Champagne would tell them not to worry, it’s all taken care of, we’ve worked out a deal with Volkswagen to build its North American battery plant in Ontario. How much did that cost us? VW knows how much, VW’s competitors probably have a good idea, too, but we can’t tell Canadians. It’s like the $6,000 hotel room in London.

I’m a free-market economist. I think the old rules do still apply. With our high-quality work force and good access to both world capital markets and the U.S. market for goods and services, Canada will end up with a diversified, successful economy, if only we let that happen. But it won’t happen if we entrust the allocation of important amounts of capital to the economic judgment of Biden, Justin Trudeau, Champagne and their like for, as Adam Smith warned, such authority “could safely be trusted, not only to no single person, but to no council or senate whatever, and would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

But folly and presumption are the new rules these days.