This article was published in the Globe and Mail on October 30th, 2025

As Prime Minister, Mark Carney has adopted the language of the private sector – talking up investments in targeted industries, housing construction, export marketing and public work force reductions. Commentators have said he is running the government like a CEO and will run Canada like a business. Mr. Carney has even changed government accounting rules to record public investments as assets rather than expenditures, mirroring corporate practice.

Many Canadians hope a business-minded approach will deliver greater efficiency. But governing a nation is fundamentally different from running a company, and the proposed shift in budget accounting could risk pushing policy in a dangerous direction.

Governments and businesses have vastly different objectives, answer to different constituencies and operate on entirely different timelines.

Business has one objective that trumps all others: maximizing profit and shareholder return. Shareholders care little if their product serves no noble purpose, nor is the welfare of their workers necessarily a priority. Consumers care little if a company goes bankrupt because of poor decisions – they simply buy elsewhere. And the bad decisions that eventually sink a company may have already generated fortunes for CEOs and shareholders, who often depart before the collapse.

The government’s goal is providing the institutional framework that allows current and future constituents to enjoy a good quality of life. This means tackling complex, interconnected issues such as poverty, public health, the environment, justice, security and the functioning of markets – not optimizing a single metric. The trade-offs between various government objectives and between current and future generations require careful analysis, consultation, collaboration and compromise.

Governments must be more risk-averse than businesses. Failing to provide Old Age Security, the Canada Pension Plan, public security or law enforcement – or leaving a crushing burden to future generations – would have far more dire societal consequences than a company bankruptcy. Government cannot act without societal acceptance or outside accepted cultural norms, both of which change slowly. This means it will never be as nimble as a business. And that’s a good thing.

Government is not a business and should not operate within markets but instead oversee them. It is not the role of government to invest in particular sectors or provide financing to favoured companies, as Ottawa is increasingly doing. When government tries to pick winners, the economy loses. Direct subsidies to companies are a bad idea, and the recent troubles with the subsidized EV battery industry offer a timely reminder.

This defies simple left-right political categorization. Economic prosperity comes from creative destruction, a process in which new innovations replace and make obsolete older innovations and businesses, and requires open, competitive markets – necessitating the removal of barriers, subsidies and inefficient regulations. However, government needs to intervene when markets fail to deliver socially desired outcomes, ensure balanced bargaining power between workers and employers, and support those negatively affected by the creative destruction process.

This confusion about the proper role of government is reflected in the new proposed budget accounting. The government will permit deficits for infrastructure spending and direct and indirect business subsidies on the principle that these actions support economic growth and yield future benefits. This new accounting scheme will not alter things significantly for infrastructure spending, which is already accounted for on an accrual basis. However, it will favour public spending on business support and lead to misguided decisions.

Subsidies toward dying industries or those with the best lobby teams will be favoured over measures to reduce delays in business adjudication or improve labour-market training because the latter, while more beneficial, will be subject to the balanced operating budget rule, unlike the former. Just because the government identifies a spending measure as an investment does not mean that investment will necessarily yield net benefits. Governments have repeatedly introduced measures supposed to be transformative that proved completely inefficient.

The government’s move toward more business financing suffers from the same problem. Because the government can borrow at a risk-free rate, its lending at preferential rates to some firms is recorded as costless or revenue-generating. This fails to account for the associated risk – the very reason these firms cannot obtain loans from private markets. A firm receiving a low-interest government loan would be equally happy with a private loan at a higher rate plus a subsidy covering the interest-rate differential. Government financing of businesses at preferential rates is a taxpayer funded subsidy and should be recorded as such.

This idea that government should be run like a business, and the proposed accounting changes that flow from it, could expose Canadian taxpayers to excessive risks and make them a cash cow for inefficient businesses and special interests.