Alternative federal budget 2026-27: Industrial development

This is from a larger publication, Alternative federal budget 2026-27: Bridge to independence

Introduction

Canada finds itself at a confluence of the powerful currents of its past, present, and future, yet lacks the policy fortitude to withstand global economic winds and protect the social good. Without an industrial strategy grounded in the public interest, the country will remain vulnerable to external shocks and systemic tensions, leaving workers to bear the greatest costs.

Immediate pressures—such as threats to sovereignty from the United States regime, a stagnant economic outlook, and aging demographics¹—sit alongside long-term goals of revitalization, income and social equity, and climate resilience. The contradictions of current policy leave Canadians to foot the bill for de-risked private profits while absorbing the impacts of austerity and a retreat from climate action.

A clean, inclusive industrial strategy must work backwards from long-term goals, requiring large-scale public interventions aimed at improving quality-of-life. The Alternative Federal Budget (AFB) proposes a sweeping vision of national development within a mixed economy, measured by the tangible effectiveness of its outcomes. This cohesive strategy builds durable democratic legitimacy through effective and accountable institutions, a thoughtful just transition for labour, and a nationwide participatory process.

By exercising collective self-determination, Canadians can set a sovereign direction and decide what they want their country to look like in 2050. Setting this bold direction enables the government to lead with public coordination, strengthen state capacity, minimize corporate concentration, support the democratization of workplaces, and uphold worker dignity and social welfare.

Overview

Not unlike the 1930s economic reforms of Franklin D. Roosevelt’s New Deal in response to the Great Depression, the emerging economic landscape provides Canada with a historic opportunity to fundamentally redefine its priorities and path of development.

In doing so, Canada must learn from past implementations of industrial strategy. Fundamentally, the term refers to any suite of government policies or state interventions in the economy used to coordinate, advance, and expand certain industries. Taiwan, for instance, achieved global leadership in advanced semiconductor manufacturing by establishing the Industrial Technology Research Institute in 1973;² they started small from achievable goals, cultivated a skilled Research and Development (R&D) workforce, and aligned private firm incentives with continued R&D activities. Conversely, the checkered history of the Import Substitution System—which subsidized domestic industry—saw examples of serious failure and inefficiency in Latin America and Africa; economist Daron Acemoğlu argues in favour of support for broad sectors as correction for market failures over “government picking winners.”³

Successful industrial planning requires establishing a clear mission, cultivating political consensus and broad democratic buy-in, and leading with public coordination to strengthen domestic capacity in areas of comparative advantage.⁴ This framework should stimulate persistent economic growth while ensuring prosperity flows back to Canadians through public ownership and principles of inclusion.

Becoming principled and pragmatic

Canada can establish goals in the public interest through understanding its ongoing challenges and the contradictions of its current policy regime. While industrial policy is being hinted at in certain areas—including the sectoral Economic Strategy Tables, Defence Industrial Strategy (DIS), the Canada Strong Fund, and the “AI for All” strategy—these initiatives present limited benefits. The DIS, for example, reinforces structural reliance on the United States military-industrial complex—which accounts for 32 per cent of arms exports and owns the majority of Canada’s 10 largest firms⁵—and allocates capital towards U.S. supply chains (see Defence chapter).

Meanwhile, the broader domestic economy remains stagnant,⁶ characterized by rising inequality and unaffordability. Canada’s slow growth is compounded by an aging demographic profile that will shrink its working-age cohort and therefore its tax and labour base. Canadian overdependence on the U.S. exacerbates these vulnerabilities and cannot be entirely offset by diversification to new trading partners. Trade volatility and rising costs make it more profitable for firms to import intermediate components than to manufacture them regionally, causing serious supply chain implications and indefinite delays in critical domestic industrial investments.

While a retreat from climate action might be framed as a matter of practicality—with two out of three Canadians now prioritizing growth over environmental protection and half wanting more to be done to build pipeline capacity⁷—this focus is short-sighted as the scientific and economic realities remain unchanged. In contradiction to goals of emissions reductions, the federal government has dismantled the consumer carbon pricing system, wound down home efficiency retrofits, and suspended Clean Electricity Regulations in Alberta as part of its Memorandum of Understanding to boost oil production.⁸

Canada is far off track to meet its emissions reductions targets while climate change costs the Canadian economy $25 billion per year,⁹ a figure expected to reach $100 billion by mid-century (see Climate Change and Environment chapter). Oil and gas production accounts for 30 per cent of Canada’s greenhouse gas emissions.¹⁰ A failure to transition from fossil fuels will both result in massive climate costs and a loss of competitive standing in a global marketplace where investment in clean electricity exceeds fossil fuel investment.¹¹ Left to their own devices, a market-led transition simply will not happen fast enough, meaning the government must step forward.

The public interest is also not being served by the ongoing financialization of public assets, such as the possible privatization of infrastructure like airports,¹² nor by austerity and the erosion of public services. If the government is willing to apply industrial planning to the defence and artificial intelligence sectors, then why not extend this approach much more broadly, such as to the care economy, which accounts for 21 per cent of total national employment but is often overlooked?¹³ Canada must orient public coordination towards these fundamental domestic priorities.

Fostering green economic growth and a just transition

A thoughtful economic transition to a low-carbon economy will require working alongside fossil-fuel-reliant regions to minimize the costs of the economic shift. The development of the oil sands is itself an example of state-led industrial policy. In the 1970s, Alberta Premier Peter Lougheed directed conventional oil royalties into high-risk oil sands through a crown corporation when private capital refused to invest.¹⁴ Modern green industrial policy should mirror this bold approach by taking risks and leveraging pre-existing comparative advantages.

To achieve this, the federal government must lead with public coordination, direct regulation, and robust funding. Relying primarily on market-based private-sector tax credits and subsidies leaves climate policy highly vulnerable to political rollbacks and dependent on private profitability. Canada must leverage structural strengths by utilizing established oil sector drilling expertise for geothermal energy development and pivoting heavy manufacturing, forestry, and mining towards EVs, green steel, aluminum, and advanced biofuels. Mining and critical mineral projects must meet minimum conditions of social licence, low environmental impact, and value-added benefits. Institutions should be structured with autonomy from the government of the day to ensure the long-term durability necessary to manage a multi-decade industrial transition.

This strategy cannot gloss over job losses in regions like Alberta, where memories of the 2015 downturn remain raw but 82 per cent support a more active government role in planning for future job opportunities for energy workers.¹⁵ Securing broad democratic buy-in requires placing these communities at the geographic and decision-making centre of economic interventions through partnerships with firms to deliver workforce retraining programs along with an emphasis on democratic participation.

Advancing sovereignty through domestic capacity and democratic inclusion

To secure genuine economic self-determination and maximize social welfare, Canada must build robust institutions for democratic and demographic inclusion while boosting domestic capacity within strategic sectors. This requires mobilizing government, labour, and industry to defend and modernize vulnerable manufacturing, automotive, and forestry clusters backed by “Buy Canadian” procurement frameworks that anchor local jobs for major public infrastructure projects.¹⁶ While major projects require efficient execution to achieve efficacious outcomes, legislative overreach overrides environmental reviews and Indigenous consultation in the name of fast-tracking.¹⁷ Furthermore, communities must be structurally involved in the planning stages of projects to ensure economic value is retained within the region.

Maximizing social welfare also requires expanding public options and deeply investing in the care economy. To raise productivity in service sectors and sustain long-term living standards,¹⁸ the state must empower the sector through vocational training, targeted inputs, and supportive technologies.

Managing critical infrastructure as strategic assets under democratic control helps challenge the negative impacts of corporate oligopolies while shielding Canada from trade volatility.¹⁹ To ensure these public options genuinely serve the common good, state support should carry stringent conditions for the guaranteed creation of stable local jobs, affordable and regulated consumer rates, and equitable access for underserved and marginalized communities.

Actions

The Alternative Federal Budget will take the following actions for cohesive, resilient, and inclusive industrial development:

The AFB will allocate $300 million per year to establish an Economic Sovereignty Secretariat. Designed with structural autonomy from the political cycle, the body will institutionalize long-term planning by serving as the central administrative hub responsible for overseeing the national strategy, managing transitions, and synthesizing democratic dialogue into cohesive federal policy.

The AFB will invest $30 million per year to organize and maintain Sectoral Development Tables. While the current dialogue framework utilizes industry-led Economic Strategy Tables to advise on commercial growth, the AFB’s tables are tasked with building a broad grassroots political consensus around national goals through a participatory democratic process with workers and communities across Canada. Monitored by the Secretariat, membership will emphasize balanced economic coordination and consist of representation from government, labour, industry, equity-seeking groups, community organizations, and Indigenous Peoples. Dedicated regional tables will be permanently established in fossil-fuel-reliant regions like Alberta to ensure local communities guide regional diversification and community-level implementation strategies.

The AFB will dedicate $30 million per year to fund a comprehensive National Industrial Strategy. The strategy will articulate a clear national vision grounded in the public interest and empower the federal government to act as the primary coordinator of macroeconomic development. The framework will work backwards from long-term “2050” goals established by the Sectoral Development Tables and the Economic Sovereignty Secretariat to build resilient domestic supply chains, reduce foreign import dependencies, and organize an economy-wide roadmap with transparent timelines for the transition from oil and gas production while scaling up green sectors.

The AFB will establish a National Industrial Investment Bank which will take over the capitalization from the Canada Strong Fund. Instead of targeting a return for investors, the new bank will prioritize a return for the Canadian economy. The goal will be to loan public money to accelerate innovation, stimulate domestic capacity, and ensure shared prosperity. The bank will directly invest in clean energy infrastructure, care economy projects, and proactive economic diversification within transitioning regions while also taking risks on technologies such as geothermal energy development and low-carbon steel. Financing managed by the bank will carry binding labour, equity, green, and domestic procurement conditions.

The AFB will create an Industrial Transition Benefit at $20 billion over 10 years to protect workers in transitioning industries or otherwise displaced by trade volatility. The program will provide comprehensive wage insurance, income continuity, and training allowances for workers impacted by climate change mitigation, trade disputes, or structural shifts in the energy sector. Access to the benefit will be strictly integrated into coordinated efforts with governments and training institutions to ensure smooth pathways into adjacent, high-wage domestic industries aligned with emerging skills requirements.

The AFB will launch an Inclusive Workforce Development program allocated at $5 billion over five years to promote opportunities for underrepresented groups. Administered in partnership with educational institutions, unions, and community groups, this initiative will focus on removing systemic barriers and expanding technical, vocational, and manufacturing opportunities. It will also ensure that investments in skilled trades are matched by robust workforce funding for the care, health, and education sectors to drive productive upgrading in the service economy.

The AFB will implement a mandatory “Buy and Sell Canadian” procurement directive for all federally funded infrastructure projects. This policy framework will mandate that major public works prioritize domestic materials and regional manufacturing clusters to insulate Canada from trade volatility. All procurement contracts will feature strict labour, union, prevailing wage, and equity conditions while asserting efficacious environmental and Indigenous review processes.

The Monitor

Our Schools/Our Selves

Alternative federal budget 2026-27: Industrial development

Introduction

Overview

Becoming principled and pragmatic

Fostering green economic growth and a just transition

Advancing sovereignty through domestic capacity and democratic inclusion

Actions

About the author

Alternative Federal Budget Working Group

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