Making sense of the markets this week: January 29, 2023

The truth is: Canada has a major problem when it comes to increasing productivity throughout our economy. And this is everyone’s problem, because without per-person productivity going up, we can’t afford better health care, better education, better social welfare programs—you know, all the stuff most Canadians want our government to provide at high levels.

Morneau writes in his book: 

“From the end of the Second World War to the mid-1970s, few countries exceeded Canada’s rate of economic growth. As one measure, the weekly earnings of Canadians grew at an average of 2.54 per cent annually over that period after accounting for inflation, more than doubling our earned income. Pretty impressive, but from 1982 to 2019, our country’s real GDP rose an average of just 1.3 per cent annually, which is not impressive at all.”

Perhaps the most depressing thing about this productivity issue (which has been getting worse for years, btw) is that it is a very nuanced topic. And it’s one that’s not easy to explain. 

Increasing competition by opening up our markets to foreign competitors, and finally doing away with the ridiculous provincial trade barriers that have been stifling efficiency gains for decades, would be great long-term moves. Of course, those changes would create short-term economic losses, and the folks experiencing those losses would be very vocal. Hence, the political Catch-22.

Instead of focusing on the communication of difficult-but-important productivity policies in the areas of corporate taxation, efficient regulation, foreign investment, infrastructure and free trade, what we get instead are sugary announcements about billions of dollars in supercluster investment that don’t really increase overall productivity. 

What is often missed in these announcements is that these billions of dollars in “investments” are actually coming from taxpayers. If you’re taking tax money from productive companies in order to give it away—ahemto “invest” about $1 million for every 14 jobs “created,” then it’s not a very good economic policy.  

Given that Canada’s gross domestic product GDP per member of the labour force is 41.8% lower than the U.S.’s and 36.1% lower than France’s, it is clear there’s room for improvement. Our relatively low productivity rate is also a driver of inflationary pressures. Canada has so many advantages when it comes to geography, migration policy and political/judicial infrastructure. Now we just need to listen to the new Bill Morneau (the one with “former” in front of his name) when he says that he is finally ready to start a conversation about “serious economic issues.”

Kyle Prevost is a financial educator, author and speaker. When he’s not on a basketball court or in a boxing ring trying to recapture his youth, you can find him helping Canadians with their finances over at and the Canadian Financial Summit.


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