Industrial Policy, Critical Minerals, and Collective Security

Economic thinking alone cannot account for the geopolitical value of strategic commodity reserves.

A Sayona lithium mine in Quebec. Image from CBC.

By Kevin Haynes

Industrial policy seems to be back in vogue in the USA, but is Canada doing enough? Industrial policy has sparked enduring debate, frequently framed as a binary argument over whether it drives economic progress or stifles competition. It is important that one does not perceive it merely as an economic argument, as that would neglect industrial policy as a tool of statecraft and power and a driver of economic outcomes. In 1909, Norman Angell argued in The Great Illusion that war was economically obsolete, claiming that the interconnected global economy made conflict irrational. Liberal economists such as Richard Cobden and John Stuart Mill shared this perspective.

Friedrich Bastiat championed the idea that free trade and economic interdependence would deter war, with Bastiat often being attributed to the quote: "When goods do not cross borders, armies will." These thinkers believed that the mutual benefits of trade, as outlined by David Ricardo’s theory of comparative advantage, created dependencies that would naturally promote peace. Yet, this optimism overlooked the political and ideological forces shaping industrial and military policies. Nationalism, imperial rivalries, and the pursuit of prestige often trumped economic rationality: Despite this history, trade as a peacemaker remains a popular idea, with many arguing that U.S-China trade precludes war between the two.

Applying this kind of thinking to today’s geopolitical context repeats the mistake that many economists and political figures made ahead of the first world war. To reduce politics to what is rational is to assume politics itself is rational. This idea emerges due to the temptation to reduce the problem of politics to one of material allocation, instead of embracing the fact that politics is a problem of power — a problem that has yet to be solved.

Today’s world resembles the pre-World War 1 era, but is also very different. Technology, for instance, has changed drastically. At the outset of the first world war the machine gun was held as a paradigmatic development that would change the way war was fought — and it did. In today’s environment, one could draw a parallel to drone-warfare being waged in conflict zones as a parallel to the emergence of the machine gun just before the first world war. It is a seemingly simple, yet versatile piece of technology which has changed the way wars are fought — drone warfare in Ukraine demonstrates this fact. In spite of this development it is hard to say whether drones will be at the centre of a future war, or some other piece of technology. That is precisely the issue with predicting the future — you can’t ever be certain of it. Industrial policy, as a result, suffers from a similar sort of problem of knowing the future — which makes making policy around military industrial capacity a significant challenge for any modern nation.

The good news is that these technologies are often underpinned by a core commodity. For machine guns, it was steel. Yet steel has many uses across industry and is essential for the economy as a whole. Commodities ought to be treated differently, especially when considering military industrial output. Nowadays, microprocessors are the core commodity that the west has focused on, through efforts like the American CHIPPS act. These microprocessors, like steel, serve many purposes — from power tools to predator drones — they are present everywhere in our lives. What goes into making these microprocessors and other products on the consumer electronics supply chain is of grave concern because they depend on a network of critical minerals that are increasingly seen as strategic assets. For Canada, the intersection of industrial policy and natural resources is best understood within the context of defense strategy, particularly in collaboration with the United States. As with steel in the industrial age, things like critical minerals form the backbone of modern defense technologies, from guided missiles to advanced surveillance systems.

Recognizing this, a defense-focused approach to critical minerals is essential for national, continental and economic security. The United States has signaled the urgency of securing domestic and allied supply chains for critical technologies. For Canada, the logical extension of this policy environment is a bilateral Critical Minerals Defense Agreement — a framework that treats these resources as indispensable to North American defense capabilities. Such an agreement would elevate selected natural resources beyond their economic function, embedding them within the broader security apparatus of both nations.

Historian Barbara Tuchman said that “War is the unfolding of miscalculations.” It has become clear that Canada and most western democracies have become obsolete in their strategic thinking. They have been reacting to a never-ending cascade of crises that keep emerging, instead of anticipating and planning for them. What industrial policy like strategic commodity reserves aim to do is create the logistical groundwork in an effort to affirm more flexible statecraft in the future, should the need arise. Canada needs to lead the way for democracy to have validity in a world being torn apart by authoritarianism. Industrial policy focused on critical minerals is an opportunity to show the world what a united democracy can do to assure our NATO allies during times of extreme instability. We need to be the farm, so that they can be the factory, demonstrating the true spirit of collective security.

Kevin Haynes is a student at the Max Bell School of Public Policy and a Deputy Editor of The Bell. He has a strong theoretical foundation with degrees in political science and philosophy. He is a versatile professional with experience in leadership, technology, and campaign management. His time in post-war Croatia, along with his roles in political campaigns and IT support, has enhanced his adaptability and problem-solving abilities.