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Frontier Centre for Public Policy

To Truly Help Indigenous Communities Prosper, We Must Put the Economic Horse Before the Political Cart

Published

5 months ago

9 minute read

From the Frontier Centre for Public Policy

By Joseph Quesnel

Conservative leader Pierre Poilievre has surprised a lot of people by placing a real emphasis on his party’s relationship with Indigenous peoples. Not only has he recruited high-profile Indigenous politicians like Ellis Ross and Chief Billy Morin to be candidates, but he’s even addressed the annual meeting of the Assembly of First Nations.

As he thinks about how best to translate these efforts of engagement and outreach into a practical policy agenda, he ought to prioritize economic reconciliation over certain political reforms. This is a balance that the Trudeau government has failed to abide by.

In November 2021, Prime Minister Justin Trudeau issued a statement on the 25th anniversary of the final report of the Royal Commission on Aboriginal Peoples (RCAP)—a massive five-volume report containing 440 recommendations covering most areas of Canada’s Indigenous life.

The prime minister proudly stated his government followed through on one RCAP recommendation: In 2017, it established the Department of Crown-Indigenous Relations and North Affairs and the Department of Indigenous Services as separate departments.

Yet his government neglected—like others before it—a much more significant recommendation: the creation of economically viable and eventually self-sufficient Indigenous communities.

The result is that most Indigenous governments in Canada—even self-governing modern treaty governments—are no closer to achieving RCAP’s vision of self-sufficient Indigenous governments.

It reflects a consistent problem in the discourse about advancing progress towards the overall goal of reconciliation. Indigenous activists and scholars too often put the politics of self-government before economics.

They advocate for independent political institutions, but without a realistic economic plan, these institutions will not be free of federal economic paternalism.

They fail to put the political cart behind the economic horse.

Over 20 years ago, Dene leader Stephen Kakfwi told an interviewer that First Nations seeking self-government must first consider their community’s financial viability. No government in the world, he said, provided free housing, free education, and free government. Kakfwi wisely observed that this would not create self-reliant individuals, families, and communities.

So, what will ensure a path toward economic viability for Indigenous communities that leave the Indian Act? Long-term data on Indigenous communities provides answers.

The National Indigenous Economic Development Board (NIEDB)’s flagship Aboriginal Economic Benchmarking Report found a recurring positive correlation between greater control over land and resources and higher socio-economic outcomes.

The NIEDB’s research reveals Canada’s modern treaty process provides the greatest Indigenous economic freedom because it provides the most significant control over land and resources. Modern treaties are land claims agreements signed since the 1970s between the Crown and First Nations, in which Indigenous parties abandon reserves and federal oversight. They involve wide-reaching control over lands and resources and often self-governing institutions.

These agreements provide a favourable investment climate and create greater potential for economic development and growth by instilling certainty over rights to land and resources.

Consider two case studies, one in the U.S. and one in Canada, to understand this fully.

First is the 1971 Alaska Native Claims Settlement Act (ANCSA). The second is the 1984 Inuvialuit Final Agreement (IFA). Both agreements involved Northern Indigenous groups extinguishing rights and title in exchange for cash and full control over lands and resources. Both agreements created arm’s length corporate structures to make sound business and investment decisions for the community.

Through ANCSA, U.S. Congress provided Alaska Natives with a total cash settlement of $962.5 million and title to surface and sub-surface to 40 million acres.

ANCSA turned the Alaska Native communities into for-profit regional and village corporations with legal obligations to generate profits for their shareholders.

Alaska Natives would not allow these entities to become regular corporations. They banned selling and trading shares on the open market. They adopted ancestral restrictions on shareholder eligibility to prevent takeovers.

Alaska Native communities used their revenues to establish a fiscal relationship between all corporations that included resource revenue sharing.

As a result, ANCSA created a significant socio-economic change within the Alaska Native population and shifted from subsistence-based activities toward a more middle-class existence over a few decades.

The corporation’s economic power rested on natural resource wealth (oil and timber). However, wise investment of settlement monies and resource revenues into other businesses and ventures ensures future economic viability.

Now, turning to Canada.

The Inuvialuit of the Western Arctic signed the Inuvialuit Final Agreement (IFA) with the federal government. The IFA created two institutions, the Inuvialuit Regional Corporation (IRC) and the Inuvialuit Game Council to oversee wildlife.  The IRC corporate structure encompasses six community corporations.

The Inuvialuit Development Corporation (IDC) was the IRC’s business unit. The IDC invested settlement monies into business ventures within and outside the settlement region, focusing on creating Inuvialuit jobs. The IDC created over 20 subsidiary businesses and joint ventures in seven major business sectors. They invested in construction, manufacturing, environmental services, transportation, tourism and hospitality, real estate, and petroleum servicing.

The Inuvialuit Investment Corporation (IIC) is the IRC’s second subsidiary. IIC protects Inuvialuit funds, earns a five percent long-term return, and manages Inuvialuit corporation investment funds.  Inuvialuit Social Development Fund—the non-income generating part of the IRC—provides Inuvialuit housing, health, welfare, education, and traditional language services.

The IFA created significant socio-economic change within the Inuvialuit Settlement Region, paralleling changes within Alaska Native society after the ANCSA. The two communities differ because the promised Mackenzie Valley Pipeline project never materialized for the Inuvialuit while the Trans Alaskan Pipeline did.

One wonders how the Mackenzie Valley Pipeline could have economically improved the condition of the Inuvialuit.

So, can one conclude Indigenous communities cannot achieve economic viability without substantial natural resources? Not necessarily. Indigenous communities without substantial natural resources tend to adopt two other economic development strategies: 1) expanding land holdings, including valuable urban lands; and 2) developing high-value-added, reserve-based businesses and niche industries.

Studies by the Fraser Institute and the C.D. Howe Institute reveal that many First Nations in Canada have access to their own source revenues. A 2016 Fraser study found at least 100 First Nations at that time had access to their own source revenues that exceeded government transfers.

To replicate such successes, Ottawa must fundamentally re-orient its Indigenous policy.

The federal government—in working with First Nations seeking freedom from the Indian Act and reserve system—must develop realistic economic viability plans before signing agreements. Ottawa must place economic success and viability at the centre of its Indigenous policy approach. New agreements must include for-profit corporate structures. Ottawa must provide Indigenous communities with the fiscal tools they need to succeed, including self-taxation powers and the ability to easily expand their land base for economic purposes.

Finally, Ottawa must recognize that future Indigenous economic viability hinges on the future of Canada’s resource economy. Governments must abandon green transition policies that run counter to future Indigenous viability.

First published here.

Joseph Quesnel is a Senior Research fellow with the Frontier Centre for Public Policy

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Agriculture

Dairy Farmers Need To Wake Up Before The System Crumbles

Published on March 6, 2025

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From the Frontier Centre for Public Policy

By Dr. Sylvain Charlebois

Without reform, Canada risks losing nearly half of its dairy farms by 2030, according to experts

Few topics in Canadian agriculture generate as much debate as supply management in the dairy sector. The issue gained renewed attention when former U.S. President Donald Trump criticized Canada’s protectionist stance during NAFTA renegotiations, underscoring the need to reassess the system’s long-term viability.

While proponents argue that supply management ensures financial stability for farmers and shields them from global market volatility, critics contend that it inflates consumer prices, limits competition, and stifles innovation. A policy assessment titled Supply Management 2.0: A Policy Assessment and a Possible Roadmap for the Canadian Dairy Sector, conducted by researchers at Dalhousie University and the University of Guelph, sheds light on the system’s inefficiencies and presents a compelling case for reform.

Designed in the 1970s to regulate production and stabilize dairy prices, Canada’s supply management system operates through strict production quotas and high import tariffs. However, as successive trade agreements such as the USMCA, CETA, and CPTPP erode these protections, the system appears increasingly fragile. The federal government’s $3-billion compensation package to dairy farmers for hypothetical trade losses is a clear indication that the current structure is unsustainable.

Instead of fostering resilience, supply management has created an industry that is increasingly dependent on government payouts rather than market-driven efficiencies. If current trends persist, Canada could lose nearly half of its dairy farms by 2030 — regardless of who is in the White House.

Consumer sentiment is also shifting. Younger generations are questioning the sustainability and transparency of the dairy industry, particularly in light of scandals such as ButterGate, where palm oil supplements were used in cow feed to alter butterfat content, making butter harder at room temperature. Additionally, undisclosed milk dumping of anywhere between 600 million to 1 billion litres annually has further eroded public trust. These factors indicate that the industry is failing to align with evolving consumer expectations.

One of the most alarming findings in the policy assessment is the extent of overcapitalization in the dairy sector. Government compensation payments, coupled with rigid production quotas, have encouraged inefficiency rather than fostering innovation. Unlike their counterparts in Australia and the European Union — where deregulation has driven productivity gains — Canadian dairy farmers remain insulated from competitive pressures that could otherwise drive modernization.

The policy assessment also highlights a growing geographic imbalance in dairy production. Over 74% of Canada’s dairy farms are concentrated in Quebec and Ontario, despite only 61% of the national population residing in these provinces. This concentration exacerbates supply chain inefficiencies and increases price disparities. As a result, consumers in Atlantic Canada, the North, and Indigenous communities face disproportionately high dairy costs, raising serious food security concerns. Addressing these imbalances requires policies that promote regional diversification in dairy production.

A key element of modernization must involve a gradual reform of production quotas and tariffs. The existing quota system restricts farmers’ ability to respond dynamically to market signals. While quota allocation is managed provincially, harmonizing the system at the federal level would create a more cohesive market. Moving toward a flexible quota model, with expansion mechanisms based on demand, would increase competitiveness and efficiency.

Tariff policies also warrant reassessment. While tariffs provide necessary protection for domestic producers, they currently contribute to artificially inflated consumer prices. A phased reduction in tariffs, complemented by direct incentives for farmers investing in productivity-enhancing innovations and sustainability initiatives, could strike a balance between maintaining food sovereignty and fostering competitiveness.

Despite calls for reform, inertia persists due to entrenched interests within the sector. However, resistance is not a viable long-term strategy. Industrial milk prices in Canada are now the highest in the Western world, making the sector increasingly uncompetitive on a global scale. While supply management also governs poultry and eggs, these industries have adapted more effectively, remaining competitive through efficiency improvements and innovation. In contrast, the dairy sector continues to grapple with structural inefficiencies and a lack of modernization.

That said, abolishing supply management outright is neither desirable nor practical. A sudden removal of protections would expose Canadian dairy farmers to aggressive foreign competition, risking rural economic stability and jeopardizing domestic food security. Instead, a balanced approach is needed — one that preserves the core benefits of supply management while integrating market-driven reforms to ensure the industry remains competitive, innovative and sustainable.

Canada’s supply management system, once a pillar of stability, has become an impediment to progress. As global trade dynamics shift and consumer expectations evolve, policymakers have an opportunity to modernize the system in a way that balances fair pricing with market efficiency. The recommendations from Supply Management 2.0 suggest that regional diversification of dairy production, value-chain-based pricing models that align production with actual market demand, and a stronger emphasis on research and development could help modernize the industry. Performance-based government compensation, rather than blanket payouts that preserve inefficiencies, would also improve long-term sustainability.

The question is no longer whether reform is necessary, but whether the dairy industry and policymakers are prepared to embrace it. A smarter, more flexible supply management framework will be crucial in ensuring that Canadian dairy remains resilient, competitive, and sustainable for future generations.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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Business

Canada’s Aging Population Is Creating A Fiscal Crisis

Published on March 6, 2025

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From the Frontier Centre for Public Policy

By Ian Madsen

Rising OAS and GIS costs outpacing economic growth, straining the federal budget

Canada’s aging population is creating a financial crisis that policymakers cannot afford to ignore. The rising costs of Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) pose a growing risk to federal finances, yet no dedicated funding has been established to ensure their long-term viability.

The numbers are staggering. The 2024 Financial Accounts (Public Accounts of Canada, Volume I, p. 43) show that spending on elderly benefits rose at a compound annual growth rate (CAGR) of 6.24 per cent between 2015 and 2024, climbing from $44.1 billion to $76.04 billion. Over the same period, total federal program spending increased at a CAGR of 7.24 per cent, from $248.7 billion to $466.7 billion.

Although elderly benefits made up 17.7 per cent of total program spending in 2015, they now account for 16.3 per cent. This decline is not due to reduced spending but rather a surge in pandemic-related government expenditures, which temporarily outpaced OAS-GIS growth. Nevertheless, the trajectory is clear: elderly benefits are now the federal government’s third-largest expense, behind only ‘Other Transfer Payments’ and ‘Operating Expenses.’

While these figures already indicate a growing fiscal challenge, government projections suggest the problem will only get worse. According to the federal Fall Economic Statement (Table A1.11, p. 211), economic growth is expected to average four per cent annually until 2029-30. Yet OAS-GIS costs are projected to grow at a compound annual growth rate of 6.5 per cent, outpacing both GDP growth and other program spending. By 2029-30, spending on elderly benefits is expected to reach $104.4 billion, or 18.3 per cent of all program expenditures.

Government projections highlight the rapid growth in elderly benefits over the next six years, as shown in the table below:

Fiscal Year                  Elderly Benefits ($B)                Total Program Expenses ($B)              Percentage of Total Program Expenses
2023-24                       76.0                                          466.7                                                   16.2 per cent
2024-25                       80.9                                          485.7                                                   16.7 per cent
2025-26                       85.5                                          500.3                                                   17.1 per cent
2026-27                       90.1                                          509.3                                                   17.7 per cent
2027-28                       94.6                                          529.7                                                   17.9 per cent
2028-29                       99.5                                          549.7                                                   18.1 per cent
2029-30                       104.4                                        570.3                                                   18.3 per cent

As the table shows, OAS-GIS spending is rising as a proportion of total government expenditures. This mirrors the original crisis in the Canada Pension Plan (CPP), when benefits outpaced contributions as the population aged.

The CPP once faced a similar sustainability crisis, and its reform in 1997 offers a potential model for addressing the challenges of OAS-GIS today. The federal government overhauled the CPP by creating the Canada Pension Plan Investment Board (CPPIB), which now manages $570 billion in assets. At the time, CPP benefits were paid through general government revenues rather than dedicated investments.

The solution involved higher contribution rates and the creation of an independent investment board to manage the fund sustainably.

These changes secured the CPP’s future, but OAS-GIS remains entirely dependent on government revenue, with no financial backing of its own. That makes it even more vulnerable to economic downturns and demographic shifts.

Policymakers must take decisive action to secure its future. One option is to tighten eligibility criteria to curb uncontrolled spending. Cost-of-living adjustments should also be limited to official inflation measures, ensuring sustainability without unfairly burdening low-income seniors.

The federal government must acknowledge the problem before it becomes unmanageable. The next finance minister should seek input from actuaries, investment professionals, economists and the public to explore feasible long-term solutions. A dedicated OAS-GIS Investment Board, similar to the CPPIB, could help ensure the program’s sustainability. The government already expanded CPP in 2019—there is precedent for such an approach.

Since OAS-GIS has no existing assets, the government will need to inject capital into the program. This could be done through annual surpluses deemed excessive for current needs or through long-term debt financing. Issuing 30-, 40- or even 50-year bonds specifically designed to fund OAS-GIS could provide a market-friendly, fiscally responsible path to solvency. If properly structured, such a plan could improve Canada’s credit rating rather than weaken it, ultimately reducing borrowing costs.

Even today, OAS-GIS spending exceeds the annual federal deficit, a clear warning sign that this issue can no longer be ignored. If no action is taken, Canada will face soaring elderly benefits with no sustainable way to fund them.

The time to act is now. Delaying reform will only make the crisis worse, burdening future generations with an unsustainable system. Policymakers have a choice: build a sustainable future for OAS-GIS or allow it to become a fiscal disaster.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy.

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