Ottawa Fighting Battles on Several Flanks in Canada

FRANK MCKENNA: This is against everything, Peter, that we built this country around, the idea that we could live together as two communities, French and English. That was all part of this bargain.

PETER HAYNES: Welcome to episode 47 of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes at TD Securities, and I get the pleasure to host this monthly podcast series where we travel around the world to cover the most important global geopolitical issues of the day all from our perch here in Canada. Frank, I hope you're enjoying the festive season and looking forward to our discussion today. I understand you're going to be in Ottawa over the holidays. Tell us a little bit about your plans.

FRANK MCKENNA: For a change, and a nice change, we'll be in Canada. We're visiting with our two grandchildren and our daughter and her husband in Ottawa for this holiday season. And it'll be wonderful.

PETER HAYNES: Will you take the opportunity to see anyone else while you're in Ottawa, or are they all gone for the season, I'm assuming?

FRANK MCKENNA: Well, I hope they're all gone. They need to get away and have a break. I've never seen a more intemperate group of legislators. I think they need a time out, quite frankly, an intervention or whatever you might call it. So I hope they take some time off.

PETER HAYNES: We'll take the opportunity today to talk about some of those issues that our friends in Ottawa might need an intervention on, some of which aren't their fault. But regardless, the place that I'd like to start, and it is impacting Canada a little bit because we have been involved in some commentary lately that's being questioned, and that is Israel.

So Western nations turned up the heat in the past week on the Israeli government with President Biden telling an audience at a political fundraiser that Israel was losing international support because of, quote, "indiscriminate bombing," and in turn, the daily news coverage of mass civilian casualties in Gaza caused by this bombing activity.

Later, Canada, Australia, and New Zealand sent a joint letter to Israel asking for a pause in fighting and support for a, quote, "urgent international efforts towards a sustainable cease fire." And finally over the weekend, the UK and Germany wrote about the urgent need for a, quote, "sustainable cease fire." Benjamin Netanyahu is clearly losing the handle on Western world support. What happens next?

FRANK MCKENNA: Well, to start with, Peter, let's understand in diplomatic parlance all of these things mean different things. A pause is one level of comment. Another one is a moratorium. You can go into a different level of pauses, humanitarian pause or a longer pause. All of those words have a lot of meaning in a situation like this. So there's a lot happening here.

First of all, I think we should mention Canada's vote because this represented a very significant shift in our long held position supporting Israel in votes at the United Nations. And our rationale has always been that we did not want Israel to be isolated and that we were going to stand with Israel.

I think it's fair to say that the consensus that was developing around the world influenced Canada. A lot of like-minded middle powers such as Australia, New Zealand, Germany, and France, et cetera, all came to the same conclusion. And about the only holdout in terms of a UN vote in favor of a moratorium would be the United States.

We have to understand, Peter, because you've just referenced it, that the United States has a different kind of veto. They can vote as they want in the UN. And Israel always appreciates their support. By the way, Israel was extraordinarily upset about Canada's vote in this particular round with Prime Minister Netanyahu calling Prime Minister Trudeau and really exhorting him in the most extreme language not to do it, to at least abstain.

So Canada really went quite far here. But why are we different from the United States? Because the United States has other tools and other weapons. The United States gives a lot of money to Israel, and it provides a lot of weaponry for Israel.

Just this week, outside of Congress through the power the president has, some 14,000 ammunition shells, artillery shells are being sent to Israel. So Israel needs the United States. So they can accept really sharp criticism. And Biden criticized them sharply, as you alluded to.

The defense minister for the United States is over in Israel as we speak and is going to be pushing them to exercise more restraint in their conduct. So there's a lot of heat on Israel. And then on top of that, of course, they killed three hostages, who all seem to be sporting white flags and pleading for mercy. And that has ignited the population in Israel as well. So all of those things are weighing on them.

But on the other side of the coin, in Israel, the level of outrage remains extraordinarily high against the attack by Hamas that killed so many innocent people in such a brutal way. That has fueled the coalition which Netanyahu leads. It's a military coalition. Make no mistake about it. And it will, in my view, continue to have integrity until such time as the war is over.

Netanyahu, who of course knows that, he's already trying to shape a post-war version of events in Israel. And that's why events are playing out the way they are. Biden has criticized Israel saying that he really wants them to start thinking about a future in which the Palestinian Liberation Authority would have a role, specifically a two-state solution. And Netanyahu is rejecting that categorically, saying that he's not going to have a Hamas system on his border.

That's met a rebuke from one of his coalition partners. Benny Gantz, who's a general in the Israeli military and somebody who I met, I must say is very, very impressive. But he cautioned Netanyahu against attacking their best friend in the world, which is the United States. And specifically, Biden, who is considered to be one of the most pro-Israeli presidents in the history of the United States.

So all of that to say the whole world is seething with the turmoil around this debate. Every country is having internal issues that have been generated by this debate. And in Israel, there's huge debates taking place, which will play out over a longer period of time once the war ends.

PETER HAYNES: So are you saying that despite the criticism from President Biden, and obviously Congress is speaking up to, that Netanyahu still has a window here to continue operations to try to clear out Hamas? What could trigger the United States, for instance, to turn its vote in favor of a cease fire?

FRANK MCKENNA: Well, the United States has so many weapons to exercise. It could vote for a cease fire, which is a step above a pause, but a step below a moratorium. They have other weapons as well. They're holding back I think it's 20,000 or 22,000 rifles, which they don't want to give Israel because they're afraid they'll go in the hands of the settlers. And the settlers in the West Bank have unfortunately been killing Palestinians in the West Bank.

So the United States is trying to surgically pick areas where they might be able to have some influence. But I think that Netanyahu still has some latitude. There's still a huge amount of outrage in government circles around the world at what Hamas did. And I believe more importantly, Netanyahu has social license within Israel to prosecute this war whether the world is against them or not.

As criticism ramps up, the temperature will be taken probably on a daily basis by the government in Israel. And they will try to temper the way in which they prosecute this war to deal with that. But remember, it's a two-edged sword, and the people of Israel know it. The Israelis have lost well over 100 soldiers.

Some of them have been killed because the kind of artillery and bombing that takes place normally before you move into a block or a neighborhood didn't take place because of some of the international outrage. And as a result, the Israeli soldiers were killed in one case. Nine of them were ambushed and killed. So the Israeli soldiers know that international public opinion is costing them lives.

And the Israeli citizens know that as well, much more sophisticated about that than we are. So this will play out. I think there will be some restraint exercised. In fact, Israel would argue that they're exercising maximum restraint as the conflict continues. And if we have incidents like the hostages being killed, it will be a lot of pressure to try to moderate. We shall see. But I'd say for now, Netanyahu certainly has strong social license within his country to prosecute this war.

PETER HAYNES: And it is true to say that it is very rare for another country that's at war to be told by a third party how to run that war. And that, obviously, is part of the calculus in this whole discussion. There's another war, I'm calling it the forgotten war, unfortunately, in Ukraine. And on Saturday, President Putin warned that there will be, quote, "problems" with neighboring Finland after Finland was admitted to NATO earlier this year.

Finland shares a border of over 830 miles with Russia. And President Putin has suggested that he would be concentrating military units in the area now that Finland is part of NATO. Putin stressed again that he has no intentions to, quote, "keep going" as President Biden suggested recently in his discussions with Congress for additional funding. Putin said Russia, quote, "has no reason, no interest, no geopolitical interest, neither economic nor military to fight with NATO countries," end quote.

Putin claims he has no territorial rights over NATO nations and wants to develop rather than disrupt relations with these countries. I know no one knows whether to believe him. And I'm asking this question at a high level, Frank. But is there any reason not to believe Putin that he is not going to be aggressive and have any further territorial control over NATO countries?

FRANK MCKENNA: Yeah. I think there's one good reason, and that is that he's proven to be a sociopathic liar. The experience with Ukraine is evidence of that. You might recall that back in 2022 when Russian troops started moving to the borders of the Ukraine, he kept saying these were simply peaceful maneuvers. And when they made an excursion a little further in, he said this was in response to provocations. He said repeatedly they have no intention of invading Ukraine.

He's capable of doing that, and within a day, doing the exact opposite of what he's saying. So no, there's no reason why we should believe him. And by the way, every tyrant, every aggressor who takes another country always has the good grace to give some rationale for it. Going all the way back to Hitler and continuing up to the present, they don't like to call it for what it is. So usually, they're invited in or a local plebiscite has supported it, or so on.

So just quickly to give you a little example of Putin's aggression. In 2014, we had the invasion of Crimea and its annexation. 2022, we had the invasion of the rest of Crimea or the attempt to. Syria, where the Soviet Union has joined Syria to bomb almost into the dark ages the anti-Assad rebels. And then Moldova, the mischief that he's gone through there.

And Georgia, where he's basically supported the separatists there, sending in tanks and planes and stirring up trouble there. So when you look at all of those things together, I would say that there is no better way of describing the situation than Ronald Reagan's famous statement of trust but verify. And in this case, I think that we have no reason based on the evidence why we should trust Putin one little bit.

PETER HAYNES: Well, Putin seems to be pretty OK with the current stalemate as it's being described. And he seems to be waiting out the US government's waning support. And obviously, the US president is struggling to maintain congressional support for aid to Ukraine. So with this waning support and a potential return of Trump to the White House, how does Ukrainian President Zelenskyy convince President Biden and US Congress to keep going at least through the end of this current administration?

FRANK MCKENNA: I'll fall back on the famous statement of Winston Churchill, "The United States will do the right thing after it's exhausted all of the other opportunities." And I think that's what will happen here. They'll do all of their huffing and puffing and toing and froing, but they will end up doing the right thing. There's just too much support within the Senate both with Republicans and Democrats for this not to get across the line.

And there's too much support within the Democratic Party in the house for this not to get across the line. So there will be support for that. But I think is a little more worrisome as a year down the road. When president Putin basically endorses Trump as a friend in court in the year or so ahead, that should be chilling.

It should be chilling to Americans, and it certainly should be chilling to people in the Ukraine. And that's an issue for another day. And in the meantime, the NATO alliance seems to be very firm and very strong. Biden has been extraordinarily resolute. Not only that, but he's done a great job of rallying the NATO alliance. And I believe they will continue to prosecute the war for Ukraine.

PETER HAYNES: Trump's rhetoric over the weekend where he was referencing some comments that Putin had made seemed pretty tyrannical. And he seems to be ramping up this vitriol in his revenge speeches as he continues to climb in the polls. We'll talk more about the election and the leadership races as we move into 2024.

Let's move back to Canada. For the past couple of months, we've been speaking on this podcast at length about Alberta's long list of grievances with Ottawa. And these grievances are likely behind some of the recent actions in Alberta, such as musing about leaving the CPP. There's another provincial government that is often at odds with Ottawa, and that is Quebec.

And provincial leaders did themselves no favors with English-speaking Québecers or the rest of Canada this week with this decision to raise tuition levels at English-speaking schools for out-of-province students dramatically and, perhaps more importantly, to require proficiency in French.

That means for many of these out-of-province students, an extra semester of university. Frank, these moves are devastating economically for the city of Montreal, which houses both McGill and Concordia, two of the English-speaking universities, especially as it's obviously going to have an impact on out-of-province enrollment.

And for these two great schools and to a lesser extent Bishop's, it could be catastrophic. How much of this decision by Quebec's CAQ government led by Francois Legault is aimed at winning back support from French Canadians who've pushed the PQ to the leading position in recent provincial polling? And do you think there's any chance of it being reversed?

FRANK MCKENNA: Well, to start with, what Premier Legault did is outrageous. No other word for it. It's absolutely outrageous. And it's already having an impact on these institutions. I'm told by people close to this that applications are down by as much as 30% or 40% from people not even applying to the institutions because of the impact of this particular measure, which is exactly what they probably ultimately wanted.

So there's two reasons why Legault did this. One is his party CAQ is has been losing support to the Parti Québécois, who have a harder edged message around Quebec nationalism. It's unfortunate, but that's the case. And what's unfortunate is that the Liberal Party of Quebec, which once was the ascendant party in Quebec, has become so weak now. It's a third party and really doesn't have much weight to throw around.

But the second reason that Legault did this is just pure and simple. It's part of his nationalist agenda. A lot of people would say that he's a separatist in sheep's clothing. Rather than going out with a bang, he'd rather go out with a whimper. And it's not fun to watch his constant provocation of the government of Canada.

I spoke with a francophone minister in the government of Canada last night from Quebec. And I was told that this has reached the level of concern. The prime minister is involved, the Quebec caucus involved. And there will be a very strong statement of condemnation from the government of Canada, as there should be.

This is against everything, Peter, that we built this country around, the idea that we could live together as two communities, French and English, and that we would protect minority rights, whether they be in Manitoba or Northern Ontario. That was all part of this bargain. How can we continue to respect this part of the bargain when in the province of Quebec, the government of Quebec has a full-throated attack against a minority anglophone population. Again, I just used the words it's outrageous.

PETER HAYNES: It's a shame. And obviously, McGill is considered the Harvard of the North. I was in Montreal last week actually and spoke to quite a few people about this particular topic. And there was some musings about McGill leaving Quebec. I can't imagine how that happens when you drive by the campus and realize that McGill is Montreal. And the campus is McGill. It's all intertwined. So it would seem like that's not practical. It's just very shameful and sad. And let's hope that there can be some sort of additional compromise.

In Ottawa, there continues to be a lot of ink spilled on the topic of productivity, and Canada's growing productivity gap with the US in particular. Well, Canada, has grown its gross GDP by virtue of its immigration policies. Per capita numbers are going in the wrong direction, meaning that the average Canadian is less well off.

Last week, former bank of Canada chief David Dodge co-authored a report published by his current employer, Bennett Jones, in which he urged Canada's government and business leaders to pivot focus to policies that are centered on investment rather than consumption and calling the current pace of government transfers and spending on services, quote, "unsustainable."

Solving for the dearth of investment is the focus of recent discussions between the Canadian government and Canada's leading pension funds as the government believes these Canadian funds can help to solve the lack of investment by owning more Canadian companies.

Although I think we agreed in past episodes that passing this problem from the government to the pensions by telling them to buy assets they otherwise might not want is a cop out. Frank, how do we shift a left-leaning coalition liberal/NDP government away from spending to investment, especially when the types of government investments contemplated might run contrary to the political policies of the current coalition.

FRANK MCKENNA: This has been a chronic problem in Canada, and it cuts across political stripes. It was true during the Harper government. It's true during this Trudeau government. In the last five years alone, our productivity has fallen 0.3%. The US productivity has been up 1.7%. And almost all of the countries that we normally compare ourselves against, our productivity is in decline.

And it's one of those insidious things. It's like boiling a frog. The frog doesn't realize that it's in trouble until it's too late. And in the case of Canada, it's a direct attack on our national wealth is what it is. And we've masked it, disguised it, if you like, by continuing to have population growth through immigration. But it doesn't solve our root problem at all.

We could be a more prosperous country if we could get this productivity thing under control. So the usual remedy for that is more capital investment. And there's no doubt we need more capital investment, research, and development, more innovation at the corporate level all across the board. That is absolutely true.

But that really in a way is begging the question of what it is we would do to get more capital investment because companies normally do what's in their interest to do. And the response to that, of course, is that it's a lack of competition. Competition is what drives investment. Competition is what drives ingenuity.

In Canada in a number of sectors, we have a lack of competition. And we have a lot of sacred cows. That's why this hasn't been tackled. Inter-provincial trade barriers are one of them that cost us mightily in terms of GDP. Supply management creates higher costs for Canadians. Is it a price that we're prepared to pay for protecting small farms? Well, successive governments seem to think that it is.

There's other protected areas of the Canadian economy. Could be telecommunications, for example. And then there are privatizations. Brazil in the last three years under a socialist government has done 100 privatizations. This week alone, they privatized parts of their electrical transmission system. That's just not in the lexicon of Canadians.

And as we know, when we have privatized companies, they tend to be driven by private sector people with private sector principles. And they tend to realize that in order to compete and win, they have to invest. I mean, that's just an obvious example of why we have a problem. We've got $2 trillion worth of pension funds, the Maple 8 being the best in the world in any league table.

And yet they can't find enough to invest in Canada. And somebody is going to try to force them into the public markets. That really isn't very smart in my humble view. So the bottom line is we've got to figure this out. And I'm the last person in the world to want to suggest this because I don't like more bureaucracy and I don't like delaying things. But this is not going to be resolved unless we make it a national issue.

And the problem is trying to fix it is very difficult because nobody knows we have a problem. And you can't fix problems in public life unless you define the problem in advance. So we ended up using an exercise, well, 25 to 30 years ago, a royal commission on free trade headed by Donald MacDonald. And I guess it was a on free trade per se.

But it was a royal commission that ended up concluding that we needed free trade. And that became the basis for an election. And that became the basis for what I think is one of the most important decisions that were made in this country, to create prosperity. So my view is that we need some kind of a royal commission on prosperity. I wouldn't want to say on productivity because people don't like that word. They think it means that I work harder and I make less.

But prosperity or as the TD Economics group have called it standard of living-- they've done an excellent article on this, by the way-- but a royal commission on prosperity or standard of living or some such thing might isolate and give us all of the ammunition we need in order to undertake the big challenge, political challenge of trying to deal with this issue. Otherwise, we'll just continue to underperform, sapping our strength and vigor as a national economy, having less money to do all the good things that we want to do for our citizens.

PETER HAYNES: Well, Frank, when you talk about investment, investment at the company level, then turns those companies ultimately into an end game, which means that they end up in public markets and become vehicles that can be owned by those Maple 8 pensions. And we just don't have a lot of new companies going public.

In the year of 2023, Frank, we've had one IPO in Canada over $100 million. And so that tells you right there. And you can say, OK, it's a bad IPO market, but there's still lots of IPOs happening south of the border. And I want to say this is not an issue that is limited to the Canadian market. So I'll ask you this trivia question, Frank. Which European country do you think led the league tables in Europe in IPOs, notional of IPOs in 2023?

FRANK MCKENNA: I want to pick Germany.

PETER HAYNES: The answer is Bucharest at $1.9 billion because they privatized a utility, which became a public entity. The London Stock Exchange group raised 900 million euros in 2023 in IPOs. 900 million. And so this is not just a made-in-Canada problem. This is a global problem. Capital is being concentrated in the United States, for better or for worse.

And I worry that these investments we make in companies-- as you say, companies do the best thing for their shareholders. And ultimately, that might not be to remain a Canadian company. It might be to move to the US. It'd be hard to tell a tech company doing $1 billion IPO that they should be thought of as Canadian and not US when you look at the top seven companies in the US are all tech companies. So it just seems like there's some headwinds there that make this more complicated.

OK. Switching over to other made-in-Canada politics. The seemingly never-ending annual climate conference, COP28 came to an end last week-- at least I think it came to an end-- with a signed agreement between the members that signals, quote, "the beginning of the end of the fossil fuel era."

During the COP28 conference, Canada's ministers of the environment and energy jointly announced a new framework to cap greenhouse gas pollution from Canada's oil and gas sector by 2030 at between 35% and 38% below 2019 levels. Oil and gas emitters, which are the largest contributors to CO2 in Canada, will be able to purchase a limited amount of offset credits if above the pollution caps.

This is not the first so-called cap and trade system introduced, but it is the first one, I believe, by our federal government. And it is seen as an attack on Canada's oil and gas sector, which in turn is an attack on the province of Alberta. Local Alberta officials described this policy as, quote, "the national energy program all over again," and vowed to take Canada to court. I recognize there is a lot of vitriol being spewed. But Frank, is there some common ground to forage on this topic between the West and Ottawa on oil and gas emissions?

FRANK MCKENNA: Well, I think there is. I'll just openly declare that I'm on the side of dealing with climate change. I do think it's an insidious tax on our children and grandchildren and that we should have the guts to deal with it during our generation. I don't think we should do stupid things. And we should do things that are sustainable.

And by that, I mean introduce policies that will survive from one government to another one so that we don't end up going backwards after changing government. I've heard a lot from the Alberta government, a lot of huffing and puffing, a lot of attacking of Ottawa. But I haven't heard as much from industry itself.

And the commentary that I've seen indicates that industry was consulted and thought that this was in the higher range of what they felt was doable. And if that's the case, then I think there is common ground between Ottawa and Alberta where Ottawa rolls up its sleeves and said, OK, let's say that this is doable. What do you need? What tools do you need?

Do we need to use the federal balance sheet? Do we need to make tax concessions? Do we need to do accelerated depreciation? What of our tools would help to do something about this? Some of what needs to be done, not easy, but amongst the lower hanging fruit is deal with methane emissions. We know that methane emissions are exponentially much worse than other carbon emissions.

And if we can deal with them, then we will have really helped ourselves in solving our problem. And we can deal with methane emissions. Canada already has a very vigorous methane emission. [INAUDIBLE] saw Chrystia Freeland I think it was a week ago, and she told me she thought that we were in good shape on that because we were almost leading the world in terms of methane emission control.

Let's take something like methane emissions and really work at that. And because we're fairly well advanced to start with, I think we can do quite well on that. And we have to be a little bit careful with the rhetoric. The carbon taxation has received such a terrible, terrible reputation, carbon tax. And it's turned into a total political football. And quite frankly, those opposed to it are winning.

But there's a really interesting article in The Globe and Mail by Tony Keller last week pointing out that in the case of almost every single individual, they receive more back from carbon taxation than they pay up. And that was the design of the program. The money was supposed to come out of one pocket and into another pocket.

And we wanted people to be taxed on things that we don't want more of and to have money in their pocket to buy things that we do want more of. The problem is people have not made that connection. And the government of Canada has done a terrible job in communicating the message. So the result of that is that we're probably--

If we have an election and the opposition ends up winning, as they seem to be headed in that direction now, we'll probably get rid of the carbon tax completely when what we need to do is to communicate it a lot better and tie it more closely to carbon pricing and the impact that it has at actually reducing carbon consumption. So I think the same is true here.

I think we need to wait until the evidence starts coming in as to what industry is capable of doing. And remember this, Peter, if everybody is doing this, if everybody in the world is doing this, then I don't see how we're competitively disadvantaged. And if the cost of energy goes up as a result of this, presumably, that probably makes Alberta even wealthier than it is now. So I think we need to be thoughtful in looking at this and understand there may be a lot of different shoes to drop before it's all over.

PETER HAYNES: Another one of those topics I'm sure that we're going to be spending a lot of time discussing in 2024. Before we wrap up I want to revisit one topic we covered last month, and that was the election of a right wing leader in Argentina Javier Milei. Last week, Milei was inaugurated. And he did not wait long to implement his campaign promises to devalue and dollarize the peso, as well as cutting government agencies in half.

He also traveled to the US to meet with government leaders. And in fact, his first meeting was lunch with your friend, former President Bill Clinton. I wondered if you've had a chance to speak to President Clinton about his meeting with Milei and whether, upon reflection, you now think he can pull off his proposed reforms without causing complete civil unrest in Argentina.

FRANK MCKENNA: So to start with, let me say that Argentina has a big problem. And the fact they're taking a sledgehammer to it isn't all that surprising. Argentina was one of the 10 wealthiest countries in the world at one stage. And they've lurched from one economic crisis to another. Something dramatic was needed.

I was in Argentina, and much to my delight, I found out that there were different places where you could change your money and they all had different rates. It all depended on what street corner you happen to be. It's just not a good way to run a modern economy. So something had to be done. And I think people just grew frustrated and are prepared to elect somebody who's proposing some very strict measures.

What he's done so far has actually been fairly modest considering he's a former mystic, a former soccer player, and a tantric sex guru. I think that he's managed to pull off a pretty reasonable package of reforms to start with-- eliminating the subsidy for gasoline, devaluing the peso by 54%, and slashing public spending. Those are the kind of recipes you would expect in any economy that's spending beyond its means and has high inflation.

So I think if he sticks with that and doesn't get into some of his other crazier ideas, he's probably going to do just fine. He definitely has some ideas that are far out there. But so far, he's shown that he really has the ability to tack in towards the center, which is where most political dialogue takes place. So it's early days, but first week or two wasn't too bad.

PETER HAYNES: So what do you think the reason is he would meet with Clinton first? Is there a particular logic to that?

FRANK MCKENNA: Yeah, they're all friends. And it would make sense. And that would be a demonstration really to the Western world, and so on, that he's serious and being interested in tackling these problems. Remember that Bill Clinton would have been the last president that lowered taxes as sustained economic growth at the strongest level in the history of the United States and reduced the deficit at the same time. So not a bad role model to emulate.

PETER HAYNES: No. And it gains him some credibility with the Western world. In other words, he wasn't meeting with some of the more fringe players in Washington.

FRANK MCKENNA: No. And so far, by the way, the reaction has been pretty good. The Argentina debt has traded up. There's been some pretty strong expressions of support for the actions to date.

PETER HAYNES: Well, the social policies in that country were definitely about as far out there. They spent everything they had on their social policies. So he needs to rein that in. That's why I wonder whether or not he's going to-- the same people that voted for him are the ones that may suffer from his policies. And that's why I wonder whether or not he'll be able to hold it together.

FRANK MCKENNA: Well, it depends whether you're talking short term or long term. I think in the long term, the country will be better off if they can start living within their means. It's a rich country. My gosh, the natural resources they have is incredible. A lot of very bright people there, a lot of great entrepreneurship. But they do have to get control of their public finances.

PETER HAYNES: OK, Frank, just finally, I'd be remiss if I didn't mention that in January of this year, we did publish a predictions report on geopolitical issues for 2023. You might like to know that it was in fact our most listened to podcast of the year. So next month I plan to look back on some of your predictions for '23 as well as to look ahead to 2024.

So perhaps it's time for you to start thinking about the year ahead, which, of course, will include an election on November 5 in the US. Meanwhile, the Shohei Ohtani sweepstakes are over, and it appears the Blue Jays went all in and lost to the Dodgers, a result that admittedly tore the hearts out of baseball fans across Canada, including both you and me. Now what?

FRANK MCKENNA: Well, to start with, there seem to be 50 sushi dinners in Toronto that were unaccounted for.

PETER HAYNES: Exactly.

[LAUGHS]

Yep. Oh, well--

FRANK MCKENNA: I have had my heart broken. And for four or five hours, I was walking on air. So I'll say this. Good on Toronto for competing hard. I didn't think they would belly up, but it's pretty clear, I think. The evidence supports that they pretty well were prepared to match the offer that he had. And it's pretty clear as well he made a decision for lifestyle reasons, I guess, whatever you might want to call it.

He decided that he wanted to live in LA. And it would have been nice if he'd have told everybody that at the very beginning probably and saved a lot of toing and froing. But it gives me a moment because I wouldn't mind just talking about baseball financing because it's really gotten out of control, Peter.

And I don't know where it's all going to stop, but you've got a sports like hockey and football, and so on, that have hard caps and salaries. And I think it's helped to create some parity between the teams. Baseball, you got a multi-billionaire owner of the New York Mets who's got a $356 million payroll. And then in Oakland, we got a $56 million payroll.

And of course, what happens is it's a small market team. And the owner pulls out and takes it to Vegas and makes a fortune in doing it. So it's just not right. It's not fair. And baseball is just got to get into the world of exercising a little better control over finances and having a little more equity amongst teams. And I think if there's anything about the Ohtani situation, it's that.

And the other thing about it is the way in which they rigged his salary justifies even the luxury tax or any kind of a cap. He's taking 2 million a year until the end of his contract, at which time they'll pay him the 700 million in some form, which means that they basically can not only have Ohtani but can load up on other talent as well and blow the doors open to the vault so that they can buy themselves a championship team. Anyway, Peter, I'm just a country boy, but don't think that's right.

PETER HAYNES: I'm so glad you brought up that issue because I was listening to an interview yesterday with Shohei's agent, Nez Balelo. And they asked him point blank about taxes. And that was the one question he didn't answer. But they said they spoke to everyone before they closed the deal. And I'm thinking the one person they didn't speak to were the tax authorities in California.

Can you explain to me how he will work in that state for 10 years and make nothing, but then when he retires to Japan, he gets paid all the money that he earned during the 10 years he worked in California and every other state in the US where they have to pay taxes? How can that not be a tax avoidance issue for the state of California?

FRANK MCKENNA: Well, Peter, we've had a we've had a few people that whose names you would know that have left Toronto and gone out to Alberta for a year or two just in order to cash out all of their equity. And after everything was cashed out, come back to Toronto. So arbitrage inter-provincial takes place, and arbitrage internationally takes place. I don't know if the tax authorities could stop it. They should. But if not, baseball authorities should stop it because it's really making a mockery of the rules.

PETER HAYNES: Yep. And I will say, Frank, that I predict that when we have the next collective bargaining agreement in three years, I believe, there will be a strike. And it will be a hard cap strike. The smaller market teams are done. This is ridiculous. You've got seven teams in on Yamamoto. They're the same seven teams in on Bellinger, same seven teams in on Shohei. No one else can afford it.

It's a haves and have-not market. It's not good for the sport. So I predict there'll be a hard strike, and it'll be a long one because they'll wait out the cap. That's my prediction. I hope I'm wrong. But hopefully, that'll bring some longevity or support for the sport long term. It just doesn't make sense how baseball, quotes, "different" and they don't have to have a hard cap or a salary cap when every other sport does.

It's not different. It's wrong. So at any rate, I love the sport. Can't wait for-- I mean, next month, I'm sure we'll be counting down the days to spring training starting. So Frank, I wish you the best in Ottawa over the holiday season to you and your family. Be safe, and we'll talk to you again in January.

FRANK MCKENNA: Thank you, Peter.

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