A woman is silhouetted on a walkway at a port in Vancouver, on Aug. 14, 2023.DARRYL DYCK/The Canadian Press
Todd Hirsch is a contributing columnist for The Globe and Mail. He is a Calgary-based economist, author and public speaker and the director of the Energy Transition Centre.
“What’s holding Canada back?” I asked. “What barriers are we putting in the way to attracting global capital?”
I posed this question to an international venture capitalist I met a few weeks ago. His firm was placing gobs of VC money around the world and was exploring Canada as the next destination. But he had some reservations.
“You go to Montreal, and they say, ‘Don’t invest in Toronto.’ Then you go to Toronto, and they say, ‘Don’t invest in Montreal.’” He sighed, and continued, “It really makes you think about investing in Canada at all.”
Why would the venture capitalist care? If it’s a good investment, does it matter what Montrealers say about Toronto? Or vice versa? Why would he be visibly irritated and impatient?
The regional squabbling is a problem because it reveals a pettiness. For a city to look only 500 kilometres down Highway 401 suggests tiny horizons. It’s comical to think that Toronto and Montreal compete for global venture capital, yet that’s the impression we leave when we pit ourselves against each other. It makes us appear globally naive.
Canada’s political and punditry class have a new preoccupation these days with our national economic underperformance; it is both troubling and encouraging. It’s troubling because we have a serious problem. Our sluggish economy is making us poorer as a country. The encouraging part is that we’re starting to recognize it.
Economists have been pointing out a series of issues holding back our economy: uncompetitiveness taxes, regulatory uncertainty, lack of research and development spending, weak labour productivity growth. All of these are undeniably problems – and most of them can be tweaked with policy. Tuesday’s federal budget, while not perfect, makes admirable steps toward solutions.
But there is another problem that the budget does not address: our tendency toward small-mindedness.
We’ve seen a lot of this in the past few years: Region fighting region. City fighting city. Provinces fighting the feds. Ottawa antagonizing everyone. The saga around the home heating carbon tax exemption – in which regionalism spiralled out of control, threatening to sink the carbon tax – is the perfect example. The impact on the economy will be stark, if not already seen.
No one wants to grow a business or invest in a country that has an infighting problem, where the rules can change by the day and it’s hard to get anything done. It’s like going to a dinner party where the hosts bicker the whole time. The next time you’re invited, you may feign a headache or “other plans.”
The infighting matters economically. Global investor money can go anywhere, and it’s unlikely to put up with bickering governments arguing about who’s making the rules. A great example is the carbon tax, with provinces and Ottawa at each other’s throats over jurisdiction. We come across as incompetent. And for businesses, nothing matters more than knowing the rules – and who’s going to make them.
Why do Canadians slip so easily into this small, provincial mindset?
One explanation could be our geography relative to our economy. We are an enormous country with a thinly spread population. There are language differences, cultural divides and geographic barriers. We have less than half the population of Germany, spread over six time zones! That may make it more difficult to feel like we’re all on the same team.
Another part of the problem stems from our constitutional history. At the time of Confederation, provincial governments were given powers that, at the time, seemed relatively timid. Natural resources, health care and education in 1867 were not the powerful and lucrative areas of government they are today. Over time, provinces have developed into mini empires. The result is 10 little provincial empires that think they’re more powerful and important than they are on the global stage.
Of course you can’t unscramble the egg. But it’s a fascinating thought experiment: What would Canada look like today if health care, education and natural resources fell to the federal government rather than the provinces. There’s no reason to believe it would be perfect, necessarily. But it would likely be better because the bar, frankly, is pretty low right now; there would certainly be less “empire” mentality at the provincial level.
Unfortunately, unlike issues such as taxation and R&D spending, there is no policy fix. There is no law to be passed or rule to be changed that will get all municipalities, provinces, territories, First Nations and Ottawa to row in the same direction.
What needs to happen is an attitudinal shift. It might be what some parents yell to their squabbling kids in the back seat of the car: Grow up!
It’s been said so often it has become a cliché: Canada is at a crossroads. We are underperforming, and our future prosperity hangs in the balance. Plenty of practical issues need policy attention. But none of them will be of much use if we can’t figure out how to shake our preference for small-minded, regional thinking.