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Opinion Canada
Why isn’t Canada an economic giant?
The North American nation has vast potential, yet underperforms on the
global stage
TEJ PARIKHAdd to myFT

A freight train passes through Pincher Creek in southern Alberta.
Canada’s geography suggests it could be an economic powerhouse but it
suffers from low productivity © Artur Widak/NurPhoto/Reuters

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Canada rarely makes the global news. When it does, it is often in
reference to the exploits of Canadian entertainers — Justin Bieber,
Céline Dion and Drake. For a country of about 40mn people, roughly the
population of California, that is not a bad return on celebrity icons.
But while the country may exceed expectations in the pop and rap arena,
it underwhelms on the international economic stage, relative to its vast
potential.

By land mass it is the second-largest country in the world, with the
longest coastline. Bookended by the vast Pacific and Atlantic oceans it
has enormous trading advantages, alongside access to the largely
untapped Arctic to its north. It is a net energy exporter; it has the
third-largest proven oil reserves and is the fifth-largest producer of
natural gas — but it also boasts large deposits of critical minerals
vital to the green energy transition. And, of course, it borders the
world’s largest economy.

By any measure, Canada’s geography suggests it could be an economic
powerhouse. But few ever talk about it in such terms. By purchasing
power parity, its economy is ranked 15th globally by size, behind the
likes of Turkey, Italy and Mexico. The OECD has forecast Canadian per
capita gross domestic product growth up to 2060 to be the lowest among
advanced nations.

Canada boomed at the turn of the 20th century. Settlements grew,
industrialisation was in full swing, investment rolled in from the UK
and US. In 1904 Wilfrid Laurier, then prime minister, predicted “the
20th century shall be the century of Canada and Canadian development”.
Yet, post-second world war expansion gave way to periods of high
inflation, rising deficits and low commodity prices. Laurier’s forecast
was not true for the last century and so far it is not true for the 21st
either: PwC’s The World in 2050 report expects Canada’s global economic
ranking to slip to 22nd by the middle of the century.

Poor productivity is at the heart of the country’s growth challenges. In
an hour a Canadian worker produces just over 70 per cent of what an
American can — that’s below the euro area and even the UK based on 2022
data. Many would have expected the resource-rich economy to benefit as
globalisation powered forward, but its relative labour productivity has
actually slipped since 2000.

Canada has aggressively pursued free-trade deals; it is currently the
only G7 nation to have such agreements in force with all other G7
members. But it has not been able to take advantage of that. “Two of the
economy’s previous main drivers of economic growth — natural resources
and manufacturing — have struggled to expand in recent years, due to a
combination of a more onerous regulatory backdrop and increased
competition from abroad,” says Stephen Brown, deputy chief North America
economist at Capital Economics.

Researchers at HEC Montreal’s Centre for Productivity and Prosperity
argue that Canadian industry is not strong enough to compete globally.
Indeed, the country’s vast size, mountainous geography and provincial
legislation may hinder competition, investment and innovation among its
companies. The Business Council of Alberta estimates these internal
trade barriers are equivalent to a 6.9 per cent tariff on goods.
Protectionist measures on top have often coddled Canadian industry.

A lot comes down to population. Canada has one of the lowest population
densities in the world. Its fertility rate has been declining sharply
and it does not have enough people to capitalise on its economic
potential. Priorities may also be different from those of other
countries. Canada ranks high on health, education and life satisfaction
indicators; its leading cities, Calgary, Vancouver, and Toronto, are
considered among the world’s best to live in. And the country
consistently ranks among the top destinations for emigrants.

Canada’s attractiveness as a place to live and its openness to
immigration means there is scope to turn its demographic problems
around. Last year, it achieved its highest annual population growth rate
in more than 60 years, in part due to government efforts to recruit
migrants. The climate transition is already raising demand for its vast
copper and nickel resources as well. The melting of the Arctic ice shelf
will open new trading opportunities for northern Canada.

Rising up the GDP tables is not the be-all and end-all for any nation.
And clearly the Canadian lifestyle is coveted around the world — and not
just in developing nations. Yet, as long as current trends in
productivity continue, living standards will drop and Canada’s enormous
economic potential will remain latent. That would be a great shame for
the thousands moving there seeking a better life, and for the global
economy.

tej.parikh@ft.com

'idiotpatrol' says
Over 40% of Canadian adults are functionally illiterate: they
cannot read appliance instruction manuals, struggle to understand basic
written materials relevant to everyday life, etc.

Over 25% of incoming Ontario university students are functionally
illiterate (using the same standard).

The stats show roughly similar levels of illiteracy for immigrant and
non-immigrant populations, so don't bother with that angle.

Meanwhile, the British Columbia government is spending roughly the price
of one Vancouver house (a whopping CAD 3.4 million/year) on adult
literacy. In a province where 45% of adults are functionally illiterate
and 52% are innumerate.

So this "productivity" issue in Canada (1) is about much more than
"productivity" and (2) is not going away any time soon.

https://www.cbc.ca/radio/costofliving/let-s-get-digital-from-bitcoin-to-stocktok-plus-what-low-literacy-means-for-canada-s-economy-1.5873703/nearly-half-of-adult-canadians-struggle-with-literacy-and-that-s-bad-for-the-economy-1.5873757

https://www3.ohrc.on.ca/sites/default/files/FINAL%20R2R%20REPORT%20DESIGNED%20April%2012.pdf?_gl=1*ls462y*_ga*MTI5NzY5MjYzNi4xNjkzODQ3NTE5*_ga_K3JBNZ5N4P*MTY5Mzg0NzUxOS4xLjEuMTY5Mzg0NzUzOC4wLjAuMA
(see pp. 76-77).

https://news.gov.bc.ca/releases/2023PSFS0049-001346

Maybe the extreme wokeness of the country as well as the third
world immigration replacing the founding European populations are the
cause .

you forgot you are not allowed to say things like this!

Younglion
37 MINUTES AGO

In reply to G2D
So says the RAC IST.

IR2018
2 HOURS AGO
(Edited)
This is hilarious. Canada 'may have other priorities' like actually
enjoying life which apparently is getting in the way of turning the
place into a 'high productivity' hellscape. Productivity is not an end -
its a means in service of something, usually the enrichment of a tiny
minority. Canadians will ignore this insidious nonsense if they know
what is (genuinely) good for them.

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How do you continue to live an enjoyable life, without productivity
growth though? Its essential for higher living standards. Not sure many
Canadians are happy with exorbitant house prices.

CanadianObserver
1 HOUR AGO

In reply to anontp
You must be Canadian. "Don't worry. Someone else will pay all of the bills."

ArgueBot2017
44 MINUTES AGO
(Edited)

In reply to CanadianObserver
Canada's debt to GDP ratio (91.9%) is significantly lower than that of
the US (113.8%) . Given the intertwining of our economies, that is the
only country comparison that matters to Canada.

Source: https://www.worldeconomics.com/Debt/Canada.aspx

Luca85!
2 HOURS AGO

In an hour a Canadian worker produces just over 70 per cent of what
an American can — that’s below the euro area and even the UK based on
2022 data.

"a425couple" wrote in message news:VGoJM.815146$SuUf.544069@fx14.iad...

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