The federal economic update amounts to a grab bag of band-aids and backsliding that will fail to deliver on the economic transformation it promises.

The band-aids are high-profile measures like the GST credit top-up. At $12 billion over five years, it is the single most expensive item in this economic update. The temporary elimination of the federal gas cut will similarly provide short-term relief to households to the tune of $2.4 billion. Both will be welcomed by consumers, but neither will solve the structural causes of the affordability crisis.

The backsliding is most obvious on climate. In keeping with the fall budget — the worst climate budget since the Harper era — this economic update introduces two new fossil fuel subsidies. First is an expanded tax break for liquefied natural gas facilities. Second is a new loophole in the carbon capture tax credit for enhanced oil recovery. In other words, oil companies can now receive a climate tax credit for pumping more oil using captured carbon.

But the backsliding is even more fundamental in terms of the role of government in the economy.

The big story to come out of this update is the introduction of the $25 billion Canada Strong Fund — what the economic statement calls a sovereign wealth fund designed to “transform” the economy and create wealth for Canadians.

It is nominally inspired by Norway’s sovereign wealth fund. Norway has built a multi-trillion-dollar, publicly-owned investment fund by aggressively taxing oil revenues and then reinvesting that money outside the country. The explicit goal of the Norwegian fund is to leverage the country’s resource wealth to diversify its economy away from dependence on those very resources.

The new Canada Strong Fund does the exact opposite.

Instead of taking money out of oil and gas to invest elsewhere, it takes money out of the public purse — and out of household savings through a retail investor option — to invest in major projects, potentially including oil and gas extraction.

And instead of investing outside Canada to reduce the risk of economic concentration, it will invest primarily in Canadian projects and companies.

A new public investment fund is not necessarily a bad thing, putting aside the fact that the Canada Strong Fund bears little resemblance to an actual sovereign wealth fund. We do need more investment in Canada and giving wealthy individuals a new way to contribute to public priorities is certainly worthwhile.

Less clear is how the Canada Strong Fund will accomplish what the Canada Infrastructure Bank, the Canada Growth Fund, the Clean Economy Investment Tax Credits and various other federal financing initiatives rolled out over the past decade could not. The federal government has already committed more than $100 billion toward incentives for the private sector to invest in strategic sectors. There is little to show for it so far.

Not only does the Canada Strong Fund double down on this uninspired approach of deferring to private sector leadership, but it is even less ambitious than some of those previous initiatives. In fact, this new fund looks a lot less like some transformative economic driver and a lot more like a run-of-the-mill mutual fund.

The Canada Strong Fund will be governed by a board of directors at arm’s length from the government, it will pursue “market-rate returns” by “participating alongside other investors on a fully commercial basis” and it will invest “only in minority positions alongside private capital,” rather than taking any kind of leadership role in the projects it invests in.

So what is it supposed to be? Will it invest in transformative, strategic infrastructure, even if that infrastructure is not profitable? Or will it seek to maximize returns by piling into profitable projects that may or may not meet Canada’s economic needs?

And if it is the latter — if the federal government’s economic strategy amounts to subsidizing profitable, private-sector-led projects rather than setting the economic direction itself — then who builds the stuff that doesn’t make a profit?

The government talks a lot about “transforming” the economy, which implies both trade diversification and industrial diversification. But there’s a reason why our current economy looks the way it does. Our current trading partners and major industries are a consequence of following the easiest path to profit.

To actually transform the economy requires the federal government to do something altogether different from short-term profit-seeking. It must make big bets on future-oriented industries with long timelines to profitability. It must be prepared to invest in all the parts of the economy — the roads, the powerlines, the transit systems, the schools, the hospitals and so on — that cannot or should not be expected to make a profit. And it must be prepared to raise new revenues to pay for it — like Norway did with its oil industry.

In short, the federal government must become a visionary economic leader. And a glorified mutual fund isn’t going to cut it.

Hadrian Mertins-Kirkwood is a political economist and senior researcher with the Canadian Centre for Policy Alternatives.

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