July 20, 2024
Have we been so busy capitalizing on rising housing prices that we neglected to invest in the sorts of things that make it possible to afford a house?

Canada is no longer one of the richest nations on Earth. Country after country is passing us by

The growth crisis deepens. The latest figures from Statistics Canada confirm that Canada suffered yet another decline in per capita GDP in the fourth quarter of 2023: the fifth decline in the past six quarters, the worst sustained drop in more than 30 years. Per capita GDP, after adjusting for inflation, is now below where it was in the fourth quarter of 2014, nine years ago.

Most news reports focused on the fact that the GDP itself (i.e. total output, not per capita) did not actually drop, but eked out a 0.2-per-cent gain, after the third quarter’s small decline – meaning Canada “dodged a recession.” But the problem with Canada’s economy is not cyclical, but secular; not one of utilization, but capacity. It is not so much that growth is temporarily below potential as that potential growth has slowed to a crawl.

Nor is this a short-run problem. It has been going on for decades. In the 1950s and 60s, Canada’s economy grew at a rate of more than 5 per cent annually, after inflation. By the 1970s that had slowed to roughly 4 per cent; to 3 per cent in the 1980s; to 2.4 per cent in the 1990s; to 2 per cent in the 2000s. Over the past 10 years, it has averaged just 1.7 per cent. Last year it was 1.1 per cent.

More to the point, the economy is now growing slower than the population, which is why per capita GDP is now falling. And it’s per capita GDP that really counts, as far as living standards are concerned.

At some point all this is going to shake Canadians’ sense of their place in the world. If you took a poll, I suspect you would find most Canadians still think of us as one of the richest countries on Earth: maybe fifth or sixth. And at one time we were. As late as 1981, Canada ranked sixth among OECD countries in GDP per capita, behind only Switzerland, Luxembourg, Norway, the United States and Denmark.

But we’re not any more. As of 2022 we were 15th. Over the 40-odd years in between, Canada’s per capita GDP grew more slowly than that of 22 other OECD members. Countries that used to be poorer than us – Ireland, the Netherlands, Austria, Sweden, Iceland, Australia, Germany, Belgium, Finland – are now richer than we are.

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