Freeland fails to address future of Canadian economy in forthright terms

TORONTO—Canadians looking for serious analysis of the economy, the challenges we face, and the steps needed to sustain and improve our standard of living in Finance Minister Chrystia Freeland’s fall economic and fiscal statement could only be sorely disappointed. We got spin from a tone-deaf government desperate to regain its political footing. What we didn’t get was substance. Now more than ever, Canadians need substance and forthright leadership on how we climb out of the current morass for a better future. Freeland, who prefers to call herself deputy prime minister rather than minister of finance (a job), did promise measures which will add to the housing stock—but not soon. This was a belated and panic-driven effort to make up for several years of Liberal neglect on the urgent problems of affordability and availability and to counter the Conservative capture of the issue. It is important that the federal government has now discovered it has a responsibility for housing, contrary to Prime Minister Justin Trudeau’s musing otherwise earlier this year. Housing, though, is just part of a bigger issue: we cannot afford to do all the things we want and need to do as a country, and that won’t change until we acknowledge and effectively address what’s holding us back. We need more innovation and higher productivity to generate the wealth for a better future. Freeland and her aides could have spent useful time a week before their economic statement reading a revealing document from Statistics Canada: Perspectives on Growth, Inflation and Affordability. In just a few pages it provided a better insight than Freeland’s 131-page report, and cut to the core quickly. “Per capita output and business productivity are trending lower and are currently below levels observed before the COVID-19 pandemic,” the StatsCan report says. While Freeland boasted in her Nov. 21 statement that Canada was the GDP growth leader in the G7, this is not the case when GDP growth per capita is measured. In Canada’s case, a high level of immigration is generating a higher rate of population growth which almost inevitably contributes to economic growth. But individually, Canadians are not better off. It is per capita GDP growth that matters. As the StatsCan report notes, “economic growth, measured on a per capita basis, stagnated during the pandemic, as increases in real output did not keep pace with population growth.” Per capita GDP fell in the second quarter of this year, the third decline in the past four quarters. In fact there has been almost no gain in per capita GDP since the beginning of 2015. In the four decades leading up to the pandemic, most of the increase in per capita GDP came from gains in productivity, and with the aging of society and lower working hours. This means “productivity will remain the key driver of living standards in the post-pandemic era.” But getting back to stronger per capita growth will be not be an easy task, the StatsCan report stresses. So productivity really matters. Yet it received little attention in Freeland’s economic statement. In fact, Finance Canada, in its baseline case for the economy, noted that while productivity had grown at an annual average rate of 1.1 per cent between 1970 and 2022, between 2023 and 2028 it was projected to grow at annual average rate of just 0.7 per cent. We have to do much better if we want a successful economy, one that creates the wealth to do all the things we need to do, starting with our education and health systems, a fairer society, and one where growth is not at the expense of environmental sustainability. Future growth cannot depend on budget deficits to sustain consumption. “After rising sharply in the early stages of the pandemic, labour productivity growth has declined in 11 of the past 12 quarters and is below pre-pandemic levels,” the StatsCan report says. “A key driver of productivity growth is business investment in non-residential structures and machinery and equipment, which has pulled back since the oil-price shock of the mid-2010s” and by mid-2022 “current outlays remained 14 per cent below peak levels from 2014.” In fact, it is investment in both intangibles, including R&D, training, business organization, management, and marketing, as well as business investment in tangibles such as buildings and machinery that drive productivity. Canada’s future depends on doing much better. Yet Freeland’s statement paid little attention to these issues which are at the heart of a better future. How do we grow a much more competitive and innovative business sector, one heavily headquartered in Canada and with the ownership and rewards of ownership of intellectual property supporting a better Canada? Freeland’s failure to address the future Canadian economy in forthright terms—focusing on our gaps and weaknesses rather than parroting aimless claims that we are a world leader in clean tech and other technologies—is the great failing of this fall’s economic statement. This goes a long way to explaining why, as the StatsCan report puts it, “pressures on affordability show little signs of easing” while “financial pressures are continuing to build on younger households and those with lower and middle incomes.” As the report said, “high interest rates and inflation are likely to continue to straining household’s ability to make ends meet without going further into debt, especially among younger and lower-income families. In late 2022, more than one-third of those aged 35 to 44 said they would be unable to cover an unexpected expense of $500.” “What Canadians deserve today is for us to address the very real pain that so many are feeling—with a hopeful and achievable vision for our country’s future, “Freeland said in her statement, adding this was “the priority of our fall economic statement.” Somehow, she forgot to include the vision that she said was also her personal priority. We deserve better. Time is not on our side. David Crane can be reached at crane@interlog.com. The Hill Times

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Freeland fails to address future of Canadian economy in forthright terms

Now more than ever, Canadians need substance and forthright leadership on how we climb out of the current morass for a better future.

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