Canada can always be relied on to do well, but, asks the prestigious Economist Magazine of London, can it be relied on to do better?
The Hamilton Spectator
(Jan 16, 2006)
Measured by almost any standard you care to think of, Canada is a success story. Apart from being physically beautiful, politically stable and socially tolerant, it is rich. Canadians enjoy the sixth-highest GDP per head in the OECD, which makes them better off than the Japanese, Germans and French. The UN Human Development Index rates Canada the world's fifth most agreeable country to live in.
The federal government's relations with the west, Quebec and the United States may be testy, but are unlikely to change any of these fundamentals in the foreseeable future.
Yet, Canada does have some flaws, many of which are merely the obverse of its virtues. Its enlightened social policy is accompanied by a sometimes stifling political correctness: an American writer living in Toronto calls Canada "the dictatorship of virtue." Canadians dislike conflict, so politicians tend to leave divisive issues -- the fate of Quebec, policy towards the aboriginal population -- unresolved or for the courts to settle.
Wary of succumbing to the culture wars that have polarized America, Canada's political debate is tepid: most people seemed happy to gather around an unadventurous liberal (and Liberal) consensus. As befits the people who rejected the American Revolution, Canadians distrust big ideas, preferring to put their faith in a proven ability to muddle through.
The price of all this is a certain complacency. And the price of complacency is a certain lack of ambition. This may explain the attitude of Canadians to the one significant measure by which they do fail: they are poorer than their next-door neighbours, and the gap is widening.
According to a study by the University of Toronto's Institute for Competitiveness and Prosperity, in 1981 Americans were $1,800 Cdn per person better off than Canadians; by 2003 their financial advantage had increased to $7,200 Cdn.
* * *
Many Canadians affect not to mind about this prosperity gap. There is more to life than money, they say, and it is worth being a little poorer if that is the price of preserving their social model: a kinder, gentler and more egalitarian capitalism than the heartless version they detect south of the border.
It sounds admirable. But this proud-not-to-win attitude -- what one Canadian diplomat has bewailed as a "passion for bronze" -- misses the point. If Canadians were more productive, the society would be richer. And although the extra wealth might be used for personal consumption, it could also, if Canadians preferred, be used to increase social spending.
Besides, the point of comparing their performance with America is not that Canadians are in a win-or-lose race with a neighbour that happens to have one of the most dynamic economies in the world. The point is to test whether they are making the most of their own endowments.
The productivity numbers suggest that they may not be. Canada outperforms America in some sectors. It claims its automakers are far more efficient. But its overall productivity growth has fallen behind in recent years. Since 2000, business-sector output per man-hour in Canada has grown by 0.9 per cent a year, compared with 3.5 per cent in the United States, according to Andrew Sharpe, director of the Center for the Study of Living Standards, a think tank in Ottawa. This means that the gap has become much bigger.
Whereas in 2000 Canada's output per man-hour was 82 per cent of America's, it is now only 75 per cent. "Relative to the United States, our productivity performance has dropped off a cliff," the Council of Chief Executives told the House of Commons at the end of September. As in all productivity debates, the true size of this gap, the reasons for it and the implications are all hotly debated, but low investment is thought to be a prime culprit. Another deterrent to investment might be the deeper penetration of trade unions north of the border -- which Canada will not be able to change at the stroke of a pen.
Tax is a more suitable case for stroke-of-the-pen treatment. Canada's marginal tax burden on capital is higher than America's, and Paul Martin's Liberals seem to have accepted the argument that bringing down the high rate of corporate tax would encourage investment. The government has already made some modest cuts and promised more. But as a minority government since June 2004, the Liberals have had to keep the New Democrats in Parliament sweet. One victim of Martin's political weakness may be the former finance minister's famous fiscal discipline: federal spending last year rose by a worrying 15 per cent.
* * *
And what will happen to Canada if all the weather systems identified in this survey turn nasty at once? Assume that Canada gets a minority government. And assume that the sovereignty movement continues to strengthen in Quebec. And assume that Alberta continues to pile up annual surpluses of $8 billion Cdn or so one after another, separating itself even further in wealth and values from the rest of the federation. What then?
Canada would probably not break up. It is held together, among other things, by what Gordon Gibson of the Fraser Institute in Vancouver disparages as "sentiment and inertia," but which are nevertheless very powerful forces. But nor would it have a strong central government capable of mobilizing the country behind bold social or economic initiatives.
That would be a pity. Admiring economists at the OECD note that the sacrifices Canada made in the 1990s to put its finances in order have left it in the enviable position of being able to focus now on the longer-term impediments to growth. In Martin, the architect of the previous reforms, it has a prime minister ideally placed to do this. But for all his technocratic talents, Martin has been bad at focusing on anything since becoming prime minister. And, if the latest polls prove accurate, he won't be prime minister for much longer.
Nevertheless, such is the strength of its resource-boosted economy that Canada can still be relied on to do well. But what a waste it would be if dysfunctional politics made it miss its chance to go for gold.
Link
The Hamilton Spectator
(Jan 16, 2006)
Measured by almost any standard you care to think of, Canada is a success story. Apart from being physically beautiful, politically stable and socially tolerant, it is rich. Canadians enjoy the sixth-highest GDP per head in the OECD, which makes them better off than the Japanese, Germans and French. The UN Human Development Index rates Canada the world's fifth most agreeable country to live in.
The federal government's relations with the west, Quebec and the United States may be testy, but are unlikely to change any of these fundamentals in the foreseeable future.
Yet, Canada does have some flaws, many of which are merely the obverse of its virtues. Its enlightened social policy is accompanied by a sometimes stifling political correctness: an American writer living in Toronto calls Canada "the dictatorship of virtue." Canadians dislike conflict, so politicians tend to leave divisive issues -- the fate of Quebec, policy towards the aboriginal population -- unresolved or for the courts to settle.
Wary of succumbing to the culture wars that have polarized America, Canada's political debate is tepid: most people seemed happy to gather around an unadventurous liberal (and Liberal) consensus. As befits the people who rejected the American Revolution, Canadians distrust big ideas, preferring to put their faith in a proven ability to muddle through.
The price of all this is a certain complacency. And the price of complacency is a certain lack of ambition. This may explain the attitude of Canadians to the one significant measure by which they do fail: they are poorer than their next-door neighbours, and the gap is widening.
According to a study by the University of Toronto's Institute for Competitiveness and Prosperity, in 1981 Americans were $1,800 Cdn per person better off than Canadians; by 2003 their financial advantage had increased to $7,200 Cdn.
* * *
Many Canadians affect not to mind about this prosperity gap. There is more to life than money, they say, and it is worth being a little poorer if that is the price of preserving their social model: a kinder, gentler and more egalitarian capitalism than the heartless version they detect south of the border.
It sounds admirable. But this proud-not-to-win attitude -- what one Canadian diplomat has bewailed as a "passion for bronze" -- misses the point. If Canadians were more productive, the society would be richer. And although the extra wealth might be used for personal consumption, it could also, if Canadians preferred, be used to increase social spending.
Besides, the point of comparing their performance with America is not that Canadians are in a win-or-lose race with a neighbour that happens to have one of the most dynamic economies in the world. The point is to test whether they are making the most of their own endowments.
The productivity numbers suggest that they may not be. Canada outperforms America in some sectors. It claims its automakers are far more efficient. But its overall productivity growth has fallen behind in recent years. Since 2000, business-sector output per man-hour in Canada has grown by 0.9 per cent a year, compared with 3.5 per cent in the United States, according to Andrew Sharpe, director of the Center for the Study of Living Standards, a think tank in Ottawa. This means that the gap has become much bigger.
Whereas in 2000 Canada's output per man-hour was 82 per cent of America's, it is now only 75 per cent. "Relative to the United States, our productivity performance has dropped off a cliff," the Council of Chief Executives told the House of Commons at the end of September. As in all productivity debates, the true size of this gap, the reasons for it and the implications are all hotly debated, but low investment is thought to be a prime culprit. Another deterrent to investment might be the deeper penetration of trade unions north of the border -- which Canada will not be able to change at the stroke of a pen.
Tax is a more suitable case for stroke-of-the-pen treatment. Canada's marginal tax burden on capital is higher than America's, and Paul Martin's Liberals seem to have accepted the argument that bringing down the high rate of corporate tax would encourage investment. The government has already made some modest cuts and promised more. But as a minority government since June 2004, the Liberals have had to keep the New Democrats in Parliament sweet. One victim of Martin's political weakness may be the former finance minister's famous fiscal discipline: federal spending last year rose by a worrying 15 per cent.
* * *
And what will happen to Canada if all the weather systems identified in this survey turn nasty at once? Assume that Canada gets a minority government. And assume that the sovereignty movement continues to strengthen in Quebec. And assume that Alberta continues to pile up annual surpluses of $8 billion Cdn or so one after another, separating itself even further in wealth and values from the rest of the federation. What then?
Canada would probably not break up. It is held together, among other things, by what Gordon Gibson of the Fraser Institute in Vancouver disparages as "sentiment and inertia," but which are nevertheless very powerful forces. But nor would it have a strong central government capable of mobilizing the country behind bold social or economic initiatives.
That would be a pity. Admiring economists at the OECD note that the sacrifices Canada made in the 1990s to put its finances in order have left it in the enviable position of being able to focus now on the longer-term impediments to growth. In Martin, the architect of the previous reforms, it has a prime minister ideally placed to do this. But for all his technocratic talents, Martin has been bad at focusing on anything since becoming prime minister. And, if the latest polls prove accurate, he won't be prime minister for much longer.
Nevertheless, such is the strength of its resource-boosted economy that Canada can still be relied on to do well. But what a waste it would be if dysfunctional politics made it miss its chance to go for gold.
Link
