Economy
Canada living standards falling behind rest of developed world
From the Fraser Institute
By Alex Whalen, Milagros Palacios, and Lawrence Schembri
On Canada Day, Deputy Prime Minister Chrystia Freeland proclaimed that “Canada is the best country in the world,” yet Canadians are getting poorer relative to their peers in many other countries and our living standards are falling. This trend is expected to continue well into the future, unless our policymakers make significant changes.
Economists often measure living standards by real gross domestic product (GDP) per person—in other words, the inflation-adjusted monetary value of what a country produces in goods and services divided by its population.
As noted in a new study published by the Fraser Institute, from 2002 to 2014, Canada’s GDP per-person growth roughly kept pace with the rest of the OECD. But from 2014 to 2022, the latest year of available comparable data, Canada’s annual average growth rate declined sharply, ranking third-lowest among 30 countries over the period. Consequently, in dollar terms, Canada’s GDP per person increased only $1,325 during this time period, compared to the OECD average increase of $5,070 (all values in 2015 U.S. dollars).
Moreover, between 2014 and 2022, Canada’s GDP per person declined from 80.4 per cent of the U.S. level to 72.3 per cent, and lost substantial ground to key allies and trading partners such as the United Kingdom, New Zealand and Australia.
And according to OECD projections, Canada will have the lowest projected average annual growth rate of GDP per person (at 0.78 per cent) from 2030 to 2060 when our GDP per person will be below the OECD average by $8,617. This represents a swing of more than $11,000 from where it was in 2002.
Why is this happening?
Several reasons, including historically weak business investment over the past decade, a substantial shift in the composition of permanent and temporary immigrants towards those with less education and fewer skills, and subdued technological innovation and adoption. These factors have combined to produce very low or negative labour productivity growth due to weak growth in the education and skills of the average worker and the amount of capital (namely plant, machinery and equipment) per worker.
While most advanced countries are experiencing similar trends, the situation in Canada is among the worst. Consequently, our relative decline in living standards grows exponentially because Canada’s poor performance compounds over time.
To break out of this rut and prevent this further decline in Canada’s living standards relative to our peers, policymakers must enact comprehensive and bold policy changes to encourage business investment and innovation, promote worker education and training, and achieve better immigration outcomes where more is not always better.
As a starting point, governments should improve the climate for business investment and for investment in education and training by streamlining regulation and major project approvals and reducing current and expected future tax burdens on firms and workers.
Levels of government debt and debt interest costs are approaching thresholds of unsustainability not seen since the 1990s. Governments, including the federal government, must exercise spending restraint to put their finances on a more sustainable path to mitigate the “crowding out” effects of government spending and debt in private markets, and thereby promote private investment. In addition, policies that liberalise intra-provincial and international trade and foster more competition, especially in key industries (e.g. transportation, communication, finance) would help boost investment, productivity and living standards.
Because GDP per person is so closely connected to incomes and living standards, Canada’s decline relative to our peer countries on this key metric should concern all Canadians. Given Canada’s projected continued poor performance, our country needs a major series of policy reforms to avoid further declines in living standards.
Authors:
Business
Within a month, 6 largest U.S. banks leave UN Net-Zero Banking Alliance
From The Center Square
Texas Comptroller Glenn Hegar has expressed skepticism about companies claiming to withdraw from ESG commitments, noting there is often doublespeak in their announcements
Within one month of each other, six of the largest U.S. banks left the United Nations Net-Zero Banking Alliance (NZBA) not soon after Donald Trump was elected president.
Last month, Goldman Sachs was the first to withdraw from the alliance, followed by Wells Fargo, The Center Square reported.
By Dec. 31, Citigroup and Bank of America left, followed by Morgan Stanley on Jan. 6 and JPMorgan on Jan. 7.
They did so after joining the alliance several years ago pledging to require environmental social governance standards (ESG) across their platforms, products and systems.
According to the “bank-led and UN-convened” alliance, global banks joined, pledging to align their lending, investment and capital markets activities with a net-zero greenhouse gas emissions by 2050, NZBA explains.
Since April 2021, 141 banks in 44 countries with more than $61 trillion in assets had joined NZBA, the alliance says. That’s down from 145 banks with more than $73 trillion in assets it reported last month after Wells Fargo and Goldman Sachs withdrew.
“In April 2021 when NZBA launched, no bank had set a science-based sectoral 2030 target for its financed emissions using 1.5°C scenarios,” it says. “Today, over half of NZBA banks have set such targets.”
They started to drop off after President-elect Donald Trump vowed to increase domestic oil and natural gas production and pledged to go after “woke” companies.
They also announced their departure two years after 19 state attorneys general launched an investigation into them for alleged deceptive trade practices connected to ESG.
Four states led the investigation: Arizona, Kentucky, Missouri and Texas. Others involved include Arkansas, Indiana, Kansas, Louisiana, Mississippi, Montana, Nebraska, Oklahoma, Tennessee and Virginia. Five state investigations aren’t public for confidentiality reasons.
In Texas, the state legislature passed a bill, which Gov. Greg Abbott signed into law, that prohibits governmental entities from entering into contracts with companies that boycott the oil and natural gas industry. The law also requires state entities to divest from financial companies that boycott the industry through ESG policies.
To date, 17 companies and 353 publicly traded investment funds are on Texas’ ESG divestment list.
After financial institutions withdraw from the NZBA, they are permitted to do business with Texas, the office of Texas Attorney General says.
However, Texas Comptroller Glenn Hegar has expressed skepticism about companies claiming to withdraw from ESG commitments, noting there is often doublespeak in their announcements, The Center Square reported.
Notably, when leaving the alliance, a Goldman Sachs spokesperson said the company was still committed to the NZBA goals and has “the capabilities to achieve our goals and to support the sustainability objectives of our clients,” EST Today reported. The company also said it was “very focused on the increasingly elevated sustainability standards and reporting requirements imposed by regulators around the world.”
“Goldman Sachs also confirmed that its goal to align its financing activities with net zero by 2050, and its interim sector-specific targets remained in place,” EST Today reported.
Five Goldman Sachs funds are listed in Texas’ ESG divestment list.
While announcing it was leaving the alliance, a JPMorgan spokesperson also affirmed the company’s commitment to reaching net-zero emissions. “We aim to contribute to real-economy decarbonization by providing our clients with the advice and capital needed to transform business models and lower carbon intensity,” the spokesperson said, Reuters reported.
Yahoo!Finance also notes that JPMorgan will continue to work with Glasgow Financial Alliance for Net Zero. “We will also continue to support the banking and investment needs of our clients who are engaged in energy transition and in decarbonizing different sectors of the economy,” the spokesperson said.
Citigroup and Bank of America also remain committed to net-zero objectives, including continuing to report on efforts to achieve 2030 net-zero targets and reducing CO2 emissions associated with corporate lending, FiNews reported.
The Comptroller’s office remains committed to “enforcing the laws of our state as passed by the Texas Legislature,” Hegar said. “Texas tax dollars should not be invested in a manner that undermines our state’s economy or threatens key Texas industries and jobs.”
Business
CRA must not enforce undemocratic capital gains tax hike: Taxpayers Federation
From the Canadian Taxpayers Federation
By Devin Drover
The Canadian Taxpayers Federation is demanding the Canada Revenue Agency to immediately halt enforcement of the proposed capital gains tax hike which has not passed a final vote in Parliament.
“The CRA is trying to enforce a tax increase without it ever becoming law,” said Devin Drover, CTF General Counsel and Atlantic Director. “Taxation should only be based on laws duly passed by elected representatives and not assumptions by unelected, unaccountable bureaucrats.”
The controversy stems from a proposal by the Trudeau government to raise the capital gains inclusion rate for the first time in 25 years. While a ways and means motion for the hike passed last year, the necessary legislation was never introduced, debated or passed.
But now that Parliament has prorogued, the tax hike is stalled until March 24, 2025, when the House of Commons resumes. Given promises from both the Conservatives and the NDP to bring down the Liberal government, it’s unlikely the legislation will pass before the next election.
Despite this, the CRA continues to move forward with enforcing the tax hike.
“It’s a central role of Parliament to vote on tax hikes before the government takes more money from you,” Drover said. “It’s wrong for the prime minister and CRA to treat your elected representative like a rubberstamp.
“The CRA must immediately halt plans to enforce legislation that hasn’t been passed and will undemocratically cost Canadians billions.”
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