From the Fraser Institute

By Jock Finlayson

The dawn of a new year is an opportune time to ponder the recent performance of Canada’s $3.4 trillion economy. And the overall picture is not exactly cheerful.

Since the start of 2025, our principal trading partner has been ruled by a president who seems determined to unravel the post-war global economic and security order that provided a stable and reassuring backdrop for smaller countries such as Canada. Whether the Canada-U.S.-Mexico trade agreement (that President Trump himself pushed for) will even survive is unclear, underscoring the uncertainty that continues to weigh on business investment in Canada.

At the same time, Europe—representing one-fifth of the global economy—remains sluggish, thanks to Russia’s relentless war of choice against Ukraine, high energy costs across much of the region, and the bloc’s waning competitiveness. The huge Chinese economy has also lost a step. None of this is good for Canada.

Yet despite a difficult external environment, Canada’s economy has been surprisingly resilient. Gross domestic product (GDP) is projected to grow by 1.7 per cent (after inflation) this year. The main reason is continued gains in consumer spending, which accounts for more than three-fifths of all economic activity. After stripping out inflation, money spent by Canadians on goods and services is set to climb by 2.2 per cent in 2025, matching last year’s pace. Solid consumer spending has helped offset the impact of dwindling exports, sluggish business investment and—since 2023—lacklustre housing markets.

Another reason why we have avoided a sharper economic downturn is that the Trump administration has, so far, exempted most of Canada’s southbound exports from the president’s tariff barrage. This has partially cushioned the decline in Canada’s exports—particularly outside of the steel, aluminum, lumber and auto sectors, where steep U.S. tariffs are in effect. While exports will be lower in 2025 than the year before, the fall is less dramatic than analysts expected 6 to 8 months ago.

Although Canada’s economy grew in 2025, the job market lost steam. Employment growth has softened and the unemployment rate has ticked higher—it’s on track to average almost 7 per cent this year, up from 5.4 per cent two years ago. Unemployment among young people has skyrocketed. With the economy showing little momentum, employment growth will remain muted next year.

Unfortunately, there’s nothing positive to report on the investment front. Adjusted for inflation, private-sector capital spending has been on a downward trajectory for the last decade—a long-term trend that can’t be explained by Trump’s tariffs. Canada has underperformed both the United States and several other advanced economies in the amount of investment per employee. The investment gap with the U.S. has widened steadily since 2014. This means Canadian workers have fewer and less up-to-date tools, equipment and technology to help them produce goods and services compared to their counterparts in the U.S. (and many other countries). As a result, productivity growth in Canada has been lackluster, narrowing the scope for wage increases.

Preliminary data indicate that both overall non-residential investment and business capital spending on machinery, equipment and advanced technology products will be down again in 2025. Getting clarity on the future of the Canada-U.S. trade relationship will be key to improving the business environment for private-sector investment. Tax and regulatory policy changes that make Canada a more attractive choice for companies looking to invest and grow are also necessary. This is where government policymakers should direct their attention in 2026.

By John Stossel

People criticize capitalism. A recent Axios-Generation poll says, “College students prefer socialism to capitalism.”

Why?

Because they believe absurd myths. Like the claim that the Soviet Union “wasn’t real socialism.”

Socialism guru Noam Chomsky tells students that. He says the Soviet Union “was about as remote from socialism as you could imagine.”

Give me a break.

The Soviets made private business illegal.

If that’s not socialism, I’m not sure what is.

“Socialism means abolishing private property and … replacing it with some form of collective ownership,” explains economist Ben Powell. “The Soviet Union had an abundance of that.”

Socialism always fails. Look at Venezuela, the richest country in Latin America about 40 years ago. Now people there face food shortages, poverty, misery and election outcomes the regime ignores.

But Al Jazeera claims Venezuela’s failure has “little to do with socialism, and a lot to do with poor governance … economic policies have failed to adjust to reality.”

“That’s the nature of socialism!” exclaims Powell. “Economic policies fail to adjust to reality. Economic reality evolves every day. Millions of decentralized entrepreneurs and consumers make fine tuning adjustments.”

Political leaders can’t keep up with that.

Still, pundits and politicians tell people, socialism does work — in Scandinavia.

“Mad Money’s Jim Cramer calls Norway “as socialist as they come!”

This too is nonsense.

“Sweden isn’t socialist,” says Powell. “Volvo is a private company. Restaurants, hotels, they’re privately owned.”

Norway, Denmark and Sweden are all free market economies.

Denmark’s former prime minister was so annoyed with economically ignorant Americans like Bernie Sanders calling Scandanavia “socialist,” he came to America to tell Harvard students that his country “is far from a socialist planned economy. Denmark is a market economy.”

Powell says young people “hear the preaching of socialism, about equality, but they don’t look on what it actually delivers: poverty, starvation, early death.”

For thousands of years, the world had almost no wealth creation. Then, some countries tried capitalism. That changed everything.

“In the last 20 years, we’ve seen more humans escape extreme poverty than any other time in human history, and that’s because of markets,” says Powell.

Capitalism makes poor people richer.

Former Rep. Jamaal Bowman (D-N.Y.) calls capitalism “slavery by another name.”

Rep. Alexandria Ocasio-Cortez (D-N.Y.) claims, “No one ever makes a billion dollars. You take a billion dollars.”

That’s another myth.

People think there’s a fixed amount of money. So when someone gets rich, others lose.

But it’s not true. In a free market, the only way entrepreneurs can get rich is by creating new wealth.

Yes, Steve Jobs pocketed billions, but by creating Apple, he gave the rest of us even more. He invented technology that makes all of us better off.

“I hope that we get 100 new super billionaires,” says economist Dan Mitchell, “because that means 100 new people figured out ways to make the rest of our lives better off.”

Former Labor Secretary Robert Reich advocates the opposite: “Let’s abolish billionaires,” he says.

He misses the most important fact about capitalism: it’s voluntary.

“I’m not giving Jeff Bezos any money unless he’s selling me something that I value more than that money,” says Mitchell.

It’s why under capitalism, the poor and middle class get richer, too.

“The economic pie grows,” says Mitchell. “We are much richer than our grandparents.”

When the media say the “middle class is in decline,” they’re technically right, but they don’t understand why it’s shrinking.

“It’s shrinking because more and more people are moving into upper income quintiles,” says Mitchell. “The rich get richer in a capitalist society. But guess what? The rest of us get richer as well.”

I cover more myths about socialism and capitalism in my new video.