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Canadian Attitudes Towards Productivity : Balancing Standard of Living and Quality of Life

During the late 1990s much was made in Canada, especially in elite and media circles, about the slow pace of productivity growth, especially relative to the United States, and this concern and focus are still evident. In government terms the debate about productivity has recently shifted to talk about innovation. A somewhat cynical view might see the shift from productivity to innovation as largely a linguistic manoeuvre on the part of government, since both are part of the government’s plans for expanding the economy and ensuring prosperity for Canadians. Ironically the new lexicon of innovation is premised on the empirically suspect assumption that the public was leery of the “p word.” In fact the terms innovation and productivity produce roughly comparable levels of public interest. It is important to recognize at the outset that the public is a far different citizenry from what it was just a decade ago when a previous government tried, in vain, to rally public support around another p word — prosperity. The policy debate about Canada’s economic performance and productivity has obvious implications for the public, not only because the public will face any costs, in terms of lower standard of living, of the failure to address productivity but also because addressing the productivity gap will necessitate some form of state action. Those who bemoan Canada’s current levels of productivity do so with an agenda for government in mind. In simplistic terms, the state has two options: to be active in terms of spending (either more or differently) in ways that might improve productivity, or to scale back the state. In the latter case, tax cuts are expected to stimulate investment in new, innovative ways of producing goods and services. In the former case, government spending is expected to address the underlying fundamentals of economic activity through infrastructure development, incentives for innovation and improvements in human capital. The allocation of resources across these different areas raises important questions for government in terms of both its expected return on investment — a largely economic and social calculus — and the public support for this allocation. The other contributors to this volume have more to say than we do about the nature T H E R E V IE W O F E C O N O M IC P E R F O R M A N C E A N D S O C IA L P R O G R E S S | 2 0 0 2 Canadian Attitudes Towards Productivity: Balancing Standard of Living and Quality of Life