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Forget identity politics — growth and investment must be Canada’s top priorities: Jack Mintz

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From the MacDonald Laurier Institute

Canadians’ real per capita incomes have stalled in the past five years, but that hasn’t been the case in other rich countries

By Jack Mintz

Last week, I wrote about Canada’s poor economic performance over the past five years compared to the United States and other industrialized countries. To recap, Canada’s standard of living has been becalmed, “as a painted ship upon a paint ocean.” Sure, we went through a bad year with the pandemic in 2020. So did other countries. Yet, we fell behind. Over the last five years, as our growth stalled, U.S. per capita GDP grew 9.3 per cent, the OECD average 5.6 per cent, resource-rich Australia 4.8 per cent and Ireland an astonishing 31 per cent.

According to IMF statistics, our share of world GDP (in purchasing-power-parity dollars), has fallen six per cent, from 1.44 per cent in 2018 to 1.36 per cent in 2023. We shouldn’t even be a G7 country anymore: in PPP dollars our economy is only the world’s 16th biggest, right behind Spain.

But that’s the past. What about the future? In 2021, the OECD projected that our economy would perform worse this decade than all other member countries, with per capita real GDP  growing only 0.7 per cent annually — though at least that would be an improvement over the past five years. The big question is why Canada is at the bottom of the heap. There are several reasons:

• The demographic time bomb: Economic growth will be more challenging this decade as many boomers retire and begin supporting their consumption by cashing in pension and other assets. Many other high-income countries, no different than Canada, are also aging rapidly, with retirees rising from roughly 25 per cent of the working population in 2020 to 40 per cent in 2035. With fewer people working and saving, GDP per capita will naturally decline (even if GDP per worker rises). Canada traditionally has been able to attract younger immigrants to make up for the output loss but international markets for skilled labour are increasingly competitive as workers, including ones born in Canada, pick and choose the country they feel offers them the best opportunities.

• Indebtedness: With interest rates higher than they have been, indebtedness also hurts economic growth. To cope with higher payments on mortgages and consumer debt, households, corporations and governments will deleverage by consuming fewer goods and services. Canada’s governments may be carrying less debt than their U.S. and G7 counterparts, but Canadian households and corporations are carrying more — fully 216 per cent of GDP in 2022, compared to 186 in Japan, 153 in the U.S., 150 in the U.K., 127 in German and just 110 per cent in Italy.  Only France, with private debts equal to 228 per cent of its GDP, will experience a greater debt drag on growth than we will.

• Shrinking world trade: Growing protectionism will especially hurt countries that rely, as we do, on trade as a source of economic growth. We currently export 33 per cent of GDP, primarily to the U.S. Geo-political tensions and decoupling from China will hit us harder than other places, like the U.S., where trade matters less.

• A costly energy transition: The extraordinary cost of building new transportation, heating and industrial energy systems over the next few years won’t realize benefits for decades, if at all.  The highest value-added per working hour in 2022 was earned in non-conventional oil extraction at $997 — more than 16 times the average of all industries ($61) and almost five times more than in mining ($205). Shifting labour out of an activity where value-added is that high means GDP will surely fall.

Energy is our largest source of export earnings so any reduction in exports will push the Canadian dollar down. With the federal government hell-bent on stopping new fossil-fuel development, especially of liquified natural gas, we will spend the next couple of decades throwing away wealth that could provide income to Canadians and taxes for governments. Our ideologically driven energy transition will cause us to lag countries like the U.S., Norway and Australia, which continue to develop and export energy while also working on clean technologies.

New technologies: The coming decade does offer the growth-friendly promise of new technologies. AI, continuing digitization and any number of innovations we can’t anticipate will allow us to produce more with the resources we have. On the other hand, adopting new technologies requires investing in new capital. And this is where Canada is weak. Since 2018 Canadian corporate investment has been about 10 per cent of GDP — almost a fifth below the United States and the OECD in general. The OECD says our poor investment performance will cost us 0.4 percentage points in per capita GDP growth every year this decade, more than in any other OECD country.

Why is our standard of living slipping compared to other industrialized economies? Demographics aside, we impose higher barriers to economic growth than our major trading partners do, especially the U.S. Innovation continues to generate great opportunities for us but if business investment remains moribund, we will miss out on many of them. Forget identity politics — growth and investment are now our top priorities.

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Agriculture

Canada’s supply management system is failing consumers

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This article supplied by Troy Media.

Troy Media By Sylvain Charlebois

The supply management system is cracking. With imports climbing, strict quotas in place and Bill C202 on the table, we’re struggling to feed ourselves

Canada’s supply management system, once seen as a pillar of food security and agricultural self-sufficiency, is failing at its most basic function:
ensuring a reliable domestic supply.

According to the Canadian Association of Regulated Importers, Canada imported more than 66.9 million kilograms of chicken as of June 14, a 54.6 per cent increase from the same period last year. That’s enough to feed 3.4 million Canadians for a full year based on average poultry consumption—roughly 446 million meals. Under a tightly managed quota system, those meals were supposed to be produced domestically. Instead imports now account for more than 12 per cent of this year’s domestic chicken production, revealing a growing dependence on foreign supply.

Supply management is Canada’s system for regulating dairy, poultry and egg production. It uses quotas and fixed prices to match domestic supply with demand while limiting imports, intended to protect farmers from global price swings and ensure stable supply.

To be fair, the avian influenza outbreak has disrupted poultry production and partially explains the shortfall. But even with that disruption, the numbers are staggering. Imports under trade quotas set by the World Trade Organization, the Canada-United States Mexico Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are running at or near their allowable monthly share—known as pro-rata
levels—signalling not just opportunity, but urgency. Supplementary import permits, meant to be used only in emergencies, have already surpassed 48 million kilograms, exceeding total annual import volumes in some previous years. This isn’t a seasonal hiccup. It’s a systemic failure.

The system, designed to buffer domestic markets from global volatility, is cracking under internal strain. When emergency imports become routine, we have to ask: what exactly is being managed?

Canada’s most recent regulated chicken production cycle, which ended May 31, saw one of the worst shortfalls in over 50 years. Strict quota limits stopped farmers from producing more to meet demand, leaving consumers with higher grocery bills and more imported food, shaking public confidence in the system.

Some defenders insist this is an isolated event. It’s not. For the second straight week, Canada has hit pro-rata import levels across all chicken categories. Bone-in and processed poultry, once minor players in emergency import programs, are now essential just to keep shelves stocked.

And the dysfunction doesn’t stop at chicken. Egg imports under the shortage allocation program have already topped 14 million dozen, a 104 per cent jump from last year. Not long ago, Canadians were mocking high U.S. egg prices. Now theirs have fallen. Ours haven’t.

All this in a country with $30 billion in quota value, supposedly designed to protect domestic production and reduce reliance on imports. Instead, we’re importing more and paying more.

Rather than addressing these failures, Ottawa is looking to entrench them. Bill C202, now before the Senate, seeks to shield supply management from future trade talks, making reform even harder. So we must ask: is this really what we’re protecting?

Meanwhile, our trading partners are taking full advantage. Chile, for instance, has increased chicken exports to Canada by more than 63 per cent, now accounting for nearly 96 per cent of CPTPP-origin imports. While Canada doubles down on protectionism, others are gaining long-term footholds in our market.

It’s time to face the facts. Supply management no longer guarantees supply. When a system meant to ensure resilience becomes a source of fragility, it’s no longer an asset—it’s an economic liability.

Dr. Sylvain Charlebois is a Canadian professor and researcher in food distribution and policy. He is senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast. He is frequently cited in the media for his insights on food prices, agricultural trends, and the global food supply chain. 

Troy Media empowers Canadian community news outlets by providing independent, insightful analysis and commentary. Our mission is to support local media in helping Canadians stay informed and engaged by delivering reliable content that strengthens community connections and deepens understanding across the country.

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Business

Prairie provinces and Newfoundland and Labrador see largest increases in size of government

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From the Fraser Institute

By Jake Fuss and Grady Munro

recent study found that Canada has experienced one of the largest increases in the size of government of any advanced country over the last decade. But within Canada, which provinces have led the way?

The size of government refers to the extent to which resources within the economy are controlled and directed by the government, and has important implications for economic growth, living standards, and economic freedom—the degree to which people are allowed to make their own economic choices.

Too much of anything can be harmful, and this is certainly true regarding the size of government. When government grows too large it begins to take on roles and resources that are better left to the private sector. For example, rather than focusing on core functions like maintaining the rule of law or national defence, a government that has grown too large might begin subsidizing certain businesses and industries over others (i.e. corporate welfare) in order to pick winners and losers in the market. As a result, economic growth slows and living standards are lower than they otherwise would be.

One way to measure the size of government is by calculating total general government spending as a share of the economy (GDP). General government spending refers to spending by governments at all levels (federal, provincial, and municipal), and by measuring this as a share of gross domestic product (GDP) we can compare across jurisdictions of different sizes.

recent study compared the size of government in Canada as a whole with that of 39 other advanced economies worldwide, and found that Canada experienced the second-largest increase in the size of government (as a share of the economy) from 2014 to 2024. In other words, since 2014, governments in Canada have expanded their role within the economy faster than governments in virtually every other advanced country worldwide—including all other countries within the Group of Seven (France, Germany, Italy, Japan, the United Kingdom, and the United States). Moreover, the study showed that Canada as a whole has exceeded the optimal size of government (estimated to fall between 24 and 32 per cent of GDP) at which a country can maximize their economic growth. Beyond that point, growth slows and is lower than it otherwise would be.

However, Canada is a decentralized country and provinces vary as to the extent to which governments direct overall economic activity. Using data from Statistics Canada, the following charts illustrate which provinces in Canada have the largest size of government and which have seen the largest increases since 2014.

The chart above shows total general government spending as a share of GDP for all ten provinces in 2023 (the latest year of available provincial data). The size of government in the provinces varies considerably, ranging from a high of 61.4 per cent in Nova Scotia to a low of 30.0 per cent in Alberta. There are geographical differences, as three Atlantic provinces (Nova Scotia, Prince Edward Island, and New Brunswick) have the largest governments while the three western-most provinces (Alberta, Saskatchewan, and British Columbia) have the smallest governments. However, as of 2023, all provinces except Alberta exceeded the optimal size of government—which again, is between 24 and 32 per cent of the economy.

To show which provinces have experienced the greatest increase in the size of government in recent years, the second chart shows the percentage point increase in total general government spending as a share of GDP from 2014 to 2023. It should be noted that this is measuring the expansion of the federal government’s role in the economy—which has been substantial nationwide—as well as growth in the respective provincial and municipal governments.

The increases in the size of government since 2014 are largest in four provinces: Newfoundland and Labrador (10.82 percentage points), Alberta (7.94 percentage points), Saskatchewan (7.31 percentage points), and Manitoba (7.17 percentage points). These are all dramatic increases—for perspective, in the study referenced above, Estonia’s 6.66 percentage point increase in its size of government was the largest out of 40 advanced countries.

The remaining six provinces experienced far lower increases in the size of government, ranging from a 2.74 percentage point increase in B.C. to a 0.44 percentage point increase in Quebec. However, since 2014, every province in Canada has seen government expand its role within the economy.

Over the last decade, Canada has experienced a substantial increase in the size of total government. Within the country, Newfoundland and Labrador and the three Prairie provinces have led the way in growing their respective governments.

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