A sign from striking Quebec health care workers lies on the ground in Montreal, on, Nov. 8.Christinne Muschi/The Canadian Press
Todd Hirsch is a Calgary-based economist, author and public speaker. He is also the director of the Energy Transition Centre and the former chief economist of ATB Financial.
Does anyone actually care about the economy any more?
It seems like a ridiculous question. After all, we’re bombarded with economic news. Our elected leaders fall over each other with slogans about the economy. Bill Clinton summed it up over 30 years ago: “It’s the economy, stupid!”
Yet what exactly is an economic issue? At its core, the economy describes how humans organize themselves around their material wants and needs. It’s about how businesses invent better mouse traps. It’s about how workers contribute, and benefit from, their talents. The market-based economic system is far from perfect and requires a lot of guard rails. Yet it is largely responsible for improving standards of living.
All this frantic chatter in the public sphere that might seem like it’s about the economy actually isn’t. It’s about a bunch of peripheral issues that are political, social and cultural.
Take the Liberal government’s fall economic update. It was chock full of measures dealing with the housing crisis – an entirely worthwhile goal. But the housing crisis is a social and political problem, not an economic one. It’s a great example of how the market-based economy falls short and requires government intervention. Housing, unlike most other consumer goods driven by supply and demand, is essential. Without it, you’ll probably die. So it transcends an economic issue and enters the realm of social and political issue. Governments, not the market, can solve the housing crisis if they work together.
Inflation and higher interest rates are, indeed, economic issues. But with inflation coming down, affordability is becoming the focus. How governments tackle that is once again a social and political question.
The federal Conservative “Axe the Tax” slogan seems to be about leaving more money in the pockets of Canadians. But scratch the surface and it’s more about ideology – particularly, the idea of less government intrusion.
Other events are swirling around us, and dominating our attention. This includes urgent ones (like war and the fentanyl crisis), less pressing ones (like Donald Trump’s legal woes and EV battery plants), and ridiculous ones (like dismantling the Canada Pension Plan) – but all are social and political, not economic.
Things that actually affect the viability of tomorrow’s economy are being ignored: productivity, the quality of education, skills training, innovation, research and development, trade, capital investment. For the most part, the urgency of these issues is being lost.
In 2023, a slough of reports – from the OECD to TD Economics – painted a bleak picture of Canada’s slipping economic competitiveness and productivity. Among our wealthy industrialized peers, Canada places dead last in real GDP per capita growth expected from both 2020-30 and 2030-60, according to the OECD. Our economy is less productive because Canadian companies are investing less in capital and technology. And we rank a meagre 17th out of 38 OECD countries in research and development spending in proportion to our GDP.
There were plenty of commentators and economists ringing the alarm bell. Yet much of this alarming news was met with a collective yawn. The outcome of that is not promising. A declining standard of living, slipping lower on global economic rankings, and a weaker tax base to fund our future social programs will be the result.
So what needs to happen?
First, Canadians need to start paying attention – and admittedly, this isn’t easy. With wars raging, forests burning and drug overdoses surging, it’s understandable that we would lose focus on building the future economy. But it’s possible to focus on both the economy as well as other things that truly matter. The trick is to filter out all of the nonsense issues that needlessly distract us. If voters were less worried about transgender students’ pronouns, and more worried about the health of our education system, we might actually get somewhere.
The second thing is greater determination by businesses to invest in long-term competitiveness and labour productivity. This, too, can be a challenge. With inflation pressures, workers shortages and tightening credit, businesses have a long list of hurdles to navigate. But it’s not sufficient for businesses to throw up their hands and blame government inaction. If your default solution to solve everything is to change the governing party, you’ve missed the point.
Which brings us to the third thing that needs to happen. Policy makers at every level need to facilitate entrepreneurship, encourage R&D spending, bolster education and simplify immigrant entry into the labour market. And if they need any practical ideas to get them started, they can refer to any of the thousands of policy papers put out by business councils and chambers of commerce.
As we sit on the doorstep of 2024, there is no end of troubling issues to worry us. But are we paying attention to the right ones? Or are we being distracted by nonsense? The strength of Canada’s future economy must surely fall into the category of things that urgently matter. Our standard of living, global competitiveness and ability to finance our social programs hang in the balance.