GOLDSTEIN: Carney can’t fix Canada’s underperforming economy on his own

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Prime Minister Mark Carney’s pledge to make the Canadian economy the strongest in the G7 is the equivalent of attempting to turn around the Titanic before it hits the iceberg.

An indication of the enormity of this task is to look at the performance of the G7 countries in real Gross Domestic Product (GDP) per capita, which measures economic output per person, adjusted for inflation, and is a widely accepted metric of a nation’s prosperity and standard of living.

Low economic growth as measured by real GDP per capita has been a longstanding problem in Canada.

Under Carney’s predecessor, Justin Trudeau (who appointed Carney to chair his economic growth task force in September 2024), Canada recorded the worst record of economic growth since the government of R.B. Bennett in the depths of the Great Depression.

According to Jake Fuss, director of fiscal studies for the Fraser Institute writing in The Hub last year, Canada’s real GDP per capita grew by 1.9% in the Trudeau years.

That was lowest in the G7, which includes the U.K., Germany, France, Italy, Japan and, most alarmingly, the U.S., our largest trading partner, where real GDP per capita grew by 14.7% during the same period.

University of Calgary economist Trevor Tombe, also writing in The Hub last year, noted real GDP per capita in the U.S. is now almost 50% higher than in Canada – unprecedented in modern history.

In the Liberals’ 2022 budget, then-finance minister Chrystia Freeland warned that unless this trend is reversed, “the Organization for Economic Co-operation and Development projects that Canada will have the lowest per-capita GDP growth rate among its (38) member countries” from 2020 to 2060.

Carney’s announcement of proposed legislation on Friday – which he wants passed before Parliament adjourns from the summer – to reduce federal barriers to interprovincial trade, increase labour mobility and streamline government approvals for nation building infrastructure projects, are all aimed at increasing economic growth.

But they all depend on co-operation by and among the provinces. And the reality is that decades of inaction on these issues has cost the Canadian economy an estimated $200 billion annually, increased the cost of goods and services to Canadians by up to 14.5% and reduced GDP growth by up to 8% annually.

At the meeting between Carney and Canada’s premiers and territorial leaders last week in Saskatoon to address these issues in the face of the threat posed to the Canadian economy by U.S. President Donald Trump’s tariffs, all the participants paid lip service to working together on these issues.

But the one premier not present – B.C.’s David Eby, who was on a trade mission to Asia – promptly rejected any new pipeline crossing his province’s territory, as did many Quebec politicians when it comes to their province.

Any new pipelines will also be opposed by environmental organizations and some (although not all) Indigenous groups who, while they do not have veto power over such projects, must be meaningfully consulted under Canadian law.

Alberta Premier Danielle Smith has cited the enormous economic damage caused by Canada’s failure to build pipelines.

Had the Northern Gateway, Energy East and Keystone pipelines been built (Keystone was killed by then-U.S. president Barack Obama), she said, Canada would be producing 2.5 million more barrels of oil per day.

“That’s $55 billion a year worth of GDP value, which is worth $17 billion to my government alone and about an equal amount to the federal government.”

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The Carney government does have more direct control of some issues it can move on to boost Canada’s economic growth.

For example, it can introduce taxation policies that encourage businesses to invest in new technologies that boost productivity, as well as increase competition.

It can lower Canada’s immigration levels so that increases in population do not exceed the rate of economic growth, which reduces GDP per capita.

It can reduce government spending.

On that issue, Carney says he intends to reduce the growth rate in the operational costs of the federal government under Trudeau from 9% annually to less than 2%.

But Carney’s election campaign platform also outlined $130 billion in new spending over four years with total deficits of $224.8 billion.

While Carney says most of that will be spent on infrastructure, it’s 71% higher than the $131.4 billion in deficit spending the Trudeau government predicted during the same period in its fall economic statement in December 2024.

Finally, of course, Carney needs to negotiate a deal on tariffs with Trump.

lgoldstein@postmedia.com