The Government of Canada is failing us


I am upset at the Government of Canada’s performance. No, not on the COVID-19 vaccine rollout front, but on the following structural problems facing us:

  • Poor population growth
  • Weak economic growth, diversification and innovation
  • Skyrocketing housing unaffordability

I know the government is facing monumental challenges, but it should be able to walk and chew gum. Instead, we see that all its energy being exhausted by the pandemic, while important structural issues like those above are ignored. These issues aren’t just “nice to haves”. By ignoring them, we consign ourselves to being nothing more than a vassal state, the runt of North America: stuck at the bottom of the value chain and increasingly unable to control our own destiny (for a concrete example of this, see how we’re unable to produce our own vaccines, PPE, or many day-to-day supplies).

Poor population growth

I have always been a strong proponent of Canada aggressively growing its population. With its small size (10x smaller than the US, 3.5x smaller than Mexico) Canada lacks the scale to be successful in the long run. A larger population makes it easier to build a business in-country since there are larger natural markets, makes it easier to grow businesses into world-beaters, and makes for a vibrant country that provides more opportunities for its citizens (as opposed to people leaving for the US because there’s more opportunity there). In fact, there’s strong evidence that Canada’s closed borders after Confederation held the country back and kept it undeveloped and rural for far too long and prevented it from becoming an economic powerhouse.

I strongly support a goal of hitting 100M Canadians by 2100, which requires that we aim for a population growth rate of ~ 1.25% per year. Unfortunately the government has not put together a package of family or immigration policies that would achieve this goal. Instead, look for another century in which Canada is a mediocre under-performer.

Weak economic growth, diversification and innovation

Canada has always been a resource colony. First it was the UK and we exported wood, furs, and raw materials. Today it’s the US, and we export oil, minerals and highly-educated, risk-taking, entrepreneurial people. This is seen in our incredibly poor productivity growth, our spectacularly bad R&D investment levels, and a truly mind-boggling yearly brain-drain to the US.

We have always occupied the bottom of the value-added chain. To make matters worse, various Liberal and Conservative governments have stuck to policies that failed to protect the few large companies that were built at that low end, allowing them to be sold off (Inco, Falconbridge, Alcan…) As a result we reap few long-term benefits (no head-offices, few spinoff jobs) for the work we do. Our innovation policy is a joke, focusing on ineffective SR&ED tax credits and a heavy reliance on branch plant building. To top it off, Canada does not use its public spending power to support local businesses. From IT to defense spending to construction, contracts go to multinationals, cementing our position at the bottom of the value chain. We are so focused on divvying up the economic pie we have that we aren’t thinking about how to grow the damn pie.

Skyrocketing housing unaffordability

The above points bring me to housing affordability . Canadian housing prices have gone apeshit over the past year – and that was on top of a decade of absolutely bonkers increases. The price of housing now far outstrips local earning potential, and it’s driving a damaging exodus from major cities (Toronto and Vancouver are the best examples). This has other incredibly bad side-effects, two of which tie directly to the structural challenges I’ve already named. First, it makes it harder to attract immigrants or for your citizens to have kids: why come here, or have kids if you don’t think you can live comfortably on an income? And second, it further depresses non-extractive, highly-innovative economic activity: why invest in startups or productivity or risky ideas if it’s easier to make 10% a year by simply buying a piece of land?

This is a problem caused by multiple levels of government – from federal (weak laws around investment) to municipal (highly restrictive zoning and development rules). Unfortunately the federal government has done little – actually, almost nothing – to curb the run up in house prices. Even basic policies like increased transparency around purchases, a foreign-buyers tax, a speculation tax, a lifetime limit on housing capital gains exceptions – none of these have been pursued.

Unfortunately, if past behavior has taught me one thing, it’s that Canadian governments have no desire to seriously tackle structural issues. Maybe its our risk-averse nature, maybe it’s our colonial history – but whatever it is, it kneecaps our ability to achieve more than the middling performance we’re currently on track for.

Add comment
