GOLDSTEIN: Chrystia Freeland ignores the bad vibes in our economy
While Canada's economic pie is getting bigger, the slice every Canadian gets is getting smaller
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While Finance Minister Chrystia Freeland insists Canada’s economy is performing strongly and the fact Canadians don’t appreciate this is causing a “vibecession,” the actual numbers from Statistics Canada released Friday tell a different story.
It reported Canada’s real GDP per capita – widely accepted as a measure of prosperity and our standard of living – fell 0.4% in the third quarter of this year.
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This means that while the overall economy grew by an annualized rate of 1% in the third quarter, down from 2.2% in the second quarter, it contracted on a per-person basis, which is the much more significant issue.
Statistics Canada said this was the sixth consecutive quarterly decline in per-capita GDP, part of a longer-term contraction of our economic growth that’s getting worse.
It means the growth of Canada’s economy is not keeping up with population growth.
As some economists describe it, it means that while Canada’s economic pie is getting bigger, the slice that every Canadian gets is getting smaller.
It also means the Trudeau government’s recent reckless policy of dramatically increasing Canada’s population by hiking immigration levels, while it boosted the overall size of the economy, simultaneously made all Canadians poorer.
That’s why the federal government recently lowered its immigration targets going forward.
In defending Canada’s economic record last week after Conservative Leader Pierre Poilievre mockingly asked Freeland during question period, “What’s her message to people who are hungry and homeless after nine years of her government – they just need to get with the vibe?” the Finance Minister shot back, “Mr. Speaker, my message to the leader of the Conservatives is to be a little more economically literate.”
She referred to a recent upward revision to Canada’s GDP growth by Statistics Canada that retroactively increased it to 1.5% in 2023 from 1.2%, to 4.2% from 3.8% in 2022 and to 6% from 5.3% in 2021, adding this “showed a good result for Canada in per-capita GDP” and the fact Canada avoided a recession is “something to celebrate.”
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Freeland has also boasted Canada today has the strongest economic growth in the G7.
But she knows the real problem is Canada’s declining per-capita GDP. She warned us about it in her 2022 budget, linking it to Canada’s low productivity rates.
Low productivity does not mean Canadian workers are lazy compared to other countries. It means they aren’t being give access to the education, training and technologies they need to work more efficiently, because of a lack of business investment in Canada.
“Most Canadian businesses have not invested at the same rate as their U.S. counterparts,” Freeland’s budget said.
“Unless this changes, the Organization for Economic Co-operation and Development projects Canada will have the lowest per-capita GDP growth among its member countries” from 2020 to 2060.
Freeland called Canada’s low productivity crisis “the Achilles heel of the Canadian economy” in her 2022 budget, adding “productivity matters because it is what guarantees the dream of every parent – that our children will be more prosperous than we are. This is a well-known Canadian problem – an insidious one. It is time for Canada to tackle it.”
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What Freeland didn’t say was that this is in part the result of the Trudeau government’s high tax, big deficit and regulatory policies being perceived by many potential investors as hostile to business – for example its campaign to downsize Canada’s oil and gas sectors, a lynchpin of Canadian prosperity, as part of its climate change agenda.
What the latest data from Statistics Canada shows is that the government isn’t tackling the issue of declining per-capita GDP effectively – granted the problem existed prior to the Trudeau government taking power in 2015, but it is getting worse under it – and that tackling it is similar to turning around the Titanic, before it hit the iceberg.
Everyone from the Bank of Canada – whose deputy governor Carolyn Rogers, recently called Canada’s low productivity a “break the glass” emergency – to the Fraser Institute, has sounded the alarm about this.
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How bad could things get?
University of Calgary economist Trevor Tombe, writing recently in The Hub, said that real GDP per capita in the U.S. is about $66,300 (in 2015 dollars) compared to $44,400 in Canada, with the U.S. economy on track to produce almost 50% more per person than Canada this year.
“A longer historical perspective reveals a striking reality,” Tombe wrote. “The gap between the Canadian and American economies has now reached its widest point in nearly a century. If this continues, we’ll have not persistently seen this wide of a gap since the days of John A. Macdonald … This stunning divergence is unprecedented in modern history.”
In other words, the “vibes” are really bad.
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