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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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Alberta

Pierre Poilievre – Per Capita, Hardisty, Alberta Is the Most Important Little Town In Canada

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From Pierre Poilievre

The tiny town of Hardisty, Alberta (623 people) moves $90 billion in energy a year—that’s more than the GDP of some countries.

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Business

Why it’s time to repeal the oil tanker ban on B.C.’s north coast

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The Port of Prince Rupert on the north coast of British Columbia. Photo courtesy Prince Rupert Port Authority

From the Canadian Energy Centre

By Will Gibson

Moratorium does little to improve marine safety while sending the wrong message to energy investors

In 2019, Martha Hall Findlay, then-CEO of the Canada West Foundation, penned a strongly worded op-ed in the Globe and Mail calling the federal ban of oil tankers on B.C.’s northern coast “un-Canadian.”

Six years later, her opinion hasn’t changed.

“It was bad legislation and the government should get rid of it,” said Hall Findlay, now director of the University of Calgary’s School of Public Policy.

The moratorium, known as Bill C-48, banned vessels carrying more than 12,500 tonnes of oil from accessing northern B.C. ports.

Targeting products from one sector in one area does little to achieve the goal of overall improved marine transport safety, she said.

“There are risks associated with any kind of transportation with any goods, and not all of them are with oil tankers. All that singling out one part of one coast did was prevent more oil and gas from being produced that could be shipped off that coast,” she said.

Hall Findlay is a former Liberal MP who served as Suncor Energy’s chief sustainability officer before taking on her role at the University of Calgary.

She sees an opportunity to remove the tanker moratorium in light of changing attitudes about resource development across Canada and a new federal government that has publicly committed to delivering nation-building energy projects.

“There’s a greater recognition in large portions of the public across the country, not just Alberta and Saskatchewan, that Canada is too dependent on the United States as the only customer for our energy products,” she said.

“There are better alternatives to C-48, such as setting aside what are called Particularly Sensitive Sea Areas, which have been established in areas such as the Great Barrier Reef and the Galapagos Islands.”

The Business Council of British Columbia, which represents more than 200 companies, post-secondary institutions and industry associations, echoes Hall Findlay’s call for the tanker ban to be repealed.

“Comparable shipments face no such restrictions on the East Coast,” said Denise Mullen, the council’s director of environment, sustainability and Indigenous relations.

“This unfair treatment reinforces Canada’s over-reliance on the U.S. market, where Canadian oil is sold at a discount, by restricting access to Asia-Pacific markets.

“This results in billions in lost government revenues and reduced private investment at a time when our economy can least afford it.”

The ban on tanker traffic specifically in northern B.C. doesn’t make sense given Canada already has strong marine safety regulations in place, Mullen said.

Notably, completion of the Trans Mountain Pipeline expansion in 2024 also doubled marine spill response capacity on Canada’s West Coast. A $170 million investment added new equipment, personnel and response bases in the Salish Sea.

“The [C-48] moratorium adds little real protection while sending a damaging message to global investors,” she said.

“This undermines the confidence needed for long-term investment in critical trade-enabling infrastructure.”

Indigenous Resource Network executive director John Desjarlais senses there’s an openness to revisiting the issue for Indigenous communities.

“Sentiment has changed and evolved in the past six years,” he said.

“There are still concerns and trust that needs to be built. But there’s also a recognition that in addition to environmental impacts, [there are] consequences of not doing it in terms of an economic impact as well as the cascading socio-economic impacts.”

The ban effectively killed the proposed $16-billion Eagle Spirit project, an Indigenous-led pipeline that would have shipped oil from northern Alberta to a tidewater export terminal at Prince Rupert, B.C.

“When you have Indigenous participants who want to advance these projects, the moratorium needs to be revisited,” Desjarlais said.

He notes that in the six years since the tanker ban went into effect, there are growing partnerships between B.C. First Nations and the energy industry, including the Haisla Nation’s Cedar LNG project and the Nisga’a Nation’s Ksi Lisims LNG project.

This has deepened the trust that projects can mitigate risks while providing economic reconciliation and benefits to communities, Dejarlais said.

“Industry has come leaps and bounds in terms of working with First Nations,” he said.

“They are treating the rights of the communities they work with appropriately in terms of project risk and returns.”

Hall Findlay is cautiously optimistic that the tanker ban will be replaced by more appropriate legislation.

“I’m hoping that we see the revival of a federal government that brings pragmatism to governing the country,” she said.

“Repealing C-48 would be a sign of that happening.”

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