A study from the Fraser Institute has found that Canada’s per-person GDP is growing at its lowest rate since the Great Depression of the 1930s.
“Canada’s in a full-blown economic growth crisis, which is homegrown and due largely to poor government policy,” said Philip Cross, senior fellow at the Fraser Institute and author of “What is Behind Canada’s Growth Crisis?”
Mr. Cross, who used to be chief economic analyst for Statistics Canada, said from 2013 to 2022, per-person GDP in Canada grew by just 0.8 percent after adjusting for inflation.
Mr. Cross’s study said the problem cannot be blamed on COVID, because the slow growth was around long before the pandemic. And it points out that, from 2016 to 2022, per-person GDP in the United States grew by 11.7 percent, compared to 2.8 percent in Canada.
“Clearly, this is a Canadian-made problem rooted in declining business investment and stagnating growth in exports,” said the study.
“The ability of the US economy to sustain growth over the past decade shows that Canada’s stagnation was not the inevitable result of an aging population or the exhaustion of technological innovations, but instead reflects factors under Canada’s control,” the study added.
Per-person GDP is a common measure of prosperity and refers to the value of goods and services produced per Canadian.
The study blames a variety of factors for Canada’s slow growth, compared to the United States.
“These include low rates of business formation, regulatory uncertainty, barriers to investment (especially in the resources sector), restrictions on internal trade, faltering confidence of foreign investors in Canada, and low levels of productivity and innovation,” it added. “One manifestation of chronic weak business investment and low productivity is the OECD’s [Organization for Economic Co-operation and Development] forecast that Canada’s per capita GDP growth between 2020 and 2060 will be the lowest among its 29 member nations.”
Mr. Cross’s study points to the fact rates of growth have been gradually dropping for decades—from over 6 percent in the late 1940s to 5 percent in the 1950s and 1960s to 4 percent in the 1970s, 3 percent in the 1980s, and 2 percent in the 1990s. The study said it briefly grew to 3.5 percent between 2000 and 2007, before dropping down to the current levels.
It adds that the numbers are important for more reasons than one—slow growth can threaten a country’s social fabric.
“Another way to appreciate the importance of sustaining economic growth is to observe how, in its absence after 2008, many Western nations focused on the distribution, not the creation, of income. This marked a return to the destructive mind set of medieval times when, in a society bereft of overall economic growth, one person’s (or class’s) standard of living could improve only at the expense of another’s,” said the study.
Mr. Cross concluded that what is needed is a change in Canadian culture so that entrepreneurship and innovation are more highly valued.
“Without a culture that supports entrepreneurship and innovation, even the best policies and institutions will produce disappointing results … Raising growth requires a resurrection of Canadians’ faith in the ability of Canada’s businesses to compete in the global marketplace without constant government guidance and intervention. In the absence of such a revival, Canada will be condemned to the stagnation seen in recent decades in Japan and much of western Europe,” it says.