Canada's Growth Challenge: A Nation's Productivity Crisis
Russ Zapotichny
Specializing in Private Capital Funds 100M+ AUM | Private Capital and Portfolio Management | Subscribe to my newsletter to learn more
The Economic Slowdown
Canada is facing a significant economic challenge as its growth momentum has substantially declined in the 21st century. The economy is now smaller than it was in 2019 when adjusted for inflation and immigration, marking a concerning trend in the nation's productivity.
The Widening Gap
The productivity gap with other nations is striking. While Canada's economic output was on par with Australia at the turn of the century, Australians are now almost 10% more productive. The gap with the United States is even more substantial, with Canada being 30% less productive and closer to lower-income states like Alabama in terms of economic performance.
The Cost to Canadians
This productivity gap has real implications for Canadians' wealth. The difference amounts to approximately $20,000 per person per year in GDP, with Canadian wages roughly 8% below their U.S. counterparts. Investment returns have also suffered - a $1,000 investment in Canada's main stock index in 2000 would be worth $4,400 today, compared to $6,000 if invested in the U.S. S&P 500.
Infrastructure and Investment Challenges
Canada's unique geography and dispersed population create distinct infrastructure and regulatory challenges. Administrative burdens across multiple government levels have created inefficiencies and increased internal trade barriers. The International Monetary Fund estimates that internal trade barriers cost the equivalent of a 20% average tariff between provinces.
The Path Forward
The solution requires a multi-faceted approach, including reducing interprovincial trade barriers, improving tax competitiveness, and better utilizing immigrant skills. The agricultural sector provides hope, demonstrating how technological advancement can dramatically improve productivity, with output per agricultural worker now about 12 times what it was in 1941.
Urgent Action Required
As the cost of living continues to rise, addressing productivity has become increasingly crucial. Without significant changes to address decades of under investment and complex regulatory hurdles, Canada risks falling further behind its global counterparts, impacting future generations' standard of living.
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“Axcess Capital Advisors Inc. is registered as an Investment Fund Manager and Restricted Portfolio Manager in Alberta and as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario. Distribution and the use of any information related to this post is unauthorized and prohibited. Exempt market products (Private Investments) made available through Axcess Capital Advisors Inc. my registered exempt market dealership. This information does not constitute a solicitation for sale or purchase of securities.? This is not an offering of securities. Offerings are made pursuant to an offering memorandum and only available to qualified investors in jurisdictions of Canada who meet certain eligibility or minimum purchase requirements. The risks of investing are outlined and detailed in the applicable offering memorandum, and you must review the offering memorandum in detail prior to investing. Investments are not guaranteed or insured, and the value of the investments may fluctuate.”