Canada's New Hope

Bloomberg Views, Michael Bloomberg, Published Wednesday, March 16th, 2016 5:50 PM EDT

The value of the Canadian dollar and the price of oil, one of the nation’s top exports, have both tumbled to near record lows. But those details -- and the apparent demise of the Keystone XL pipeline -- don’t begin to tell the story of what lies ahead for the economy of Canada, America’s second-largest trading partner.

Last year, Canadian voters elected an energetic and pragmatic prime minister, Justin Trudeau. He campaigned on a platform of inclusion and tolerance, focusing on the need to bring people together to solve problems, including pulling the country out of its economic doldrums. His youthful energy and optimism have inspired comparisons to John F. Kennedy, and like Kennedy, he is promising to cut middle-class taxes and tackle the biggest scientific challenge of his time, which today is climate change.

Trudeau’s commitment to fighting climate change coincides with his recognition that the Canadian economy has been too dependent on oil for too long. The good news for Trudeau is that the market shares his view, as local governments are proving.

In the United States, cities are often on the leading edge of change; in Canada, cities and provinces serve the same function. The most populous province, Ontario, has begun a 10-year, C$130 billion program to improve its roads, transit and hospitals. The bonds sold to pay for those investments have been outperforming the national average, including in oil-rich Alberta. Investors have decided that governments with strong infrastructure are a better bet than those that are dependent on fossil fuels -- and they are right.

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