It’s always been the case that partisan voices are willing to slam the state of the Canadian economy if it means they can score a dig against one of their political opponents. Politicians and pundits will lob accusations at the other side of the aisle until the cows come home.
A large percentage of the general public then no doubt ignores what sometimes sounds like political noise on these matters. But in recent months one thing we’ve seen more of are completely non-partisan voices stepping forward to sound the alarm on the direction of the Canadian economy. These are voices worth listening to.
The country’s big five banks like playing things straight down the middle. They never want their words to be misconstrued as playing political favourites. They speak with caution.
That’s why a new Royal Bank of Canada (RBC) report on the Canadian economy is all the more important to take seriously.
The report is headlined “Canada’s Growth Challenge: Why the economy is stuck in neutral.” That word “neutral” is troubling enough, but some of the facts the authors cite show we’ve also gone backwards in some ways.
“Our economy is now smaller than it was in 2019 when adjusted for inflation and immigration, and pretty much in the same place it was a decade ago,” it reads.
There are many culprits, but one of them is the decline in manufacturing. “The deindustrialization of many parts of Canada has cut into the country’s overall prosperity,” RBC notes. “Manufacturing is half what it was to the economy in 2000.”
While topline economic data often appears abstract, what all of this taken together means is that Canadians are worse off on multiple fronts. Our industries are suffering, which has in turn led to a lower standard of living than we could have had.
Canada doesn’t exist in a vacuum, though. We’re part of a global economy. It could be that other countries are facing the same conundrum. However that isn’t the case, as RBC puts it.
“Globally we’ve fallen behind most major economies since 2000,” the authors note. “Canada is 30% less productive than the U.S. and close to lower-income states like Alabama in terms of economy performance than tech-rich California or New York. The result: We’ve fallen from the 6th most productive economy in the Organization for Economic Co-operation and Development in 1970 to the 18th as of 2022.”
The report notes that our productivity relative to the United States has in fact been falling since the 1980s. A graph featured in the report shows that we’ve dropped even more rapidly in recent years.
The report isn’t all doom and gloom. It does offer solutions. RBC proposes cutting red tape, reducing internal trade barriers, better utilization of immigrant skills, improving tax competitiveness, adopting new technologies, and capitalizing on a highly educated workforce as key steps to moving forward.
Easy, as they put it. But also easier said than done, as they acknowledge. What it really comes down to is having a growth mindset and not being timid in unleashing the productive energies of private individuals and businesses.
Neutral is a bad gear to be stuck in. It doesn’t bode well for our future or that of our children. Moving backwards is even worse.
The RBC report is just the latest in a growing chorus of non-partisan voices weighing in on the severity of the problem. As a nation, we need to take these warnings seriously and then urge both current and future leaders to do the same.
