Juno News - Canada’s standard of living is falling behind

00:00:00.000 you're tuned in to the andrew lawton show

00:00:05.920 this is actually a good segue into this report that came out from td and we invited the author

00:00:14.780 of the report who i i don't actually believe responded at all i mean maybe they declined but

00:00:18.620 i don't think they got back to us at all uh which is unfortunate because i'm a td client i give td

00:00:23.460 a lot of money but td has said canada's standard of living is falling behind and this report talks

00:00:30.760 about the fact that well there may be some on paper economic growth in this country it's not

00:00:36.520 translating in the real economy to real prosperity for real canadians and i think this is a very

00:00:43.020 important report because it's saying that canada has been lagging behind the u.s behind other advanced

00:00:48.500 economies the the money quote here no pun intended from the report author economic growth does not

00:00:54.700 necessarily equate to economic prosperity i want to unpack this and some of the other economic trends

00:01:00.200 a little bit more here with philip cross who is the former chief economic analyst at statistics canada

00:01:06.640 and is also a monk senior fellow in economics for the mcdonald-laurier institute philip always good

00:01:12.620 to talk to you thanks for coming on today thanks for having me back andrew so i mean let's first off

00:01:17.540 talk about the sales pitch that the federal government is giving here which is that everything

00:01:21.640 is great i mean that is probably the least convincing pitch if you talk to real people in

00:01:26.600 this country but what is it they're drawing from that's making things look so rosy

00:01:31.020 as an economist frankly i'm a bit at a loss probably that the unemployment rate is at such a low level and

00:01:39.320 a lot of that reflects more that a lot of people left the labor force that we're having trouble finding

00:01:44.460 workers and finding people to do jobs not that they're not that the economy is booming uh if

00:01:50.680 you look at any other metric whether it's um gdp growth incomes uh inflation and in particular if

00:01:59.280 you look at the most dynamic sectors of the economy the ones that determine our growth going forward

00:02:04.100 which are business investment investment and exports we're way down the totem pole on these measures

00:02:11.240 yeah and i i think this td report i mean obviously the banks have their own forecasts and you know you

00:02:17.260 could find three economists in between them perhaps five opinions on uh what's happening in a particular

00:02:23.040 country here but i think when we're looking at the way that we're lagging behind other advanced economies

00:02:28.100 on standard of living that that's very key here because a lot of the times we've been told

00:02:32.640 uh by our government that oh well you know when we compare ourselves to the u.s and the uk and

00:02:38.140 european countries we're doing great but here we are we're not in that same league right now

00:02:43.120 no and i'd encourage your viewers instead of looking at the td report look at my report that came

00:02:50.320 up from the fraser institute a couple weeks ago that covered a lot of this ground uh that noted that

00:02:56.240 uh our gdp growth has fallen way behind the u.s that was true before the pandemic it occurred during the

00:03:03.060 pandemic and now in the recovery uh from the pandemic we've fallen behind the u.s by a good 10 percentage

00:03:09.360 points in growth and as i said it's it's especially because of if you compare the the sectors what explains

00:03:16.820 this difference between the u.s and canada it's especially business investment and exports you can't

00:03:22.780 blame this on an aging economy you can't say that we've exhausted technological changes it's something

00:03:28.100 very specific to this country and uh in this report basically i go on that that i think it's an

00:03:34.680 increasingly anti-business culture and and way of talking to to firms that i find is the biggest

00:03:41.680 difference between canada and the u.s yeah i'm glad you brought that up because you you mentioned and i i

00:03:46.820 think i actually pulled the quote out here you you talk about the fact that uh the importance of a

00:03:51.760 nation's culture to economic growth without a culture that supports entrepreneurship and innovation

00:03:56.280 even the best policies and institutions will produce disappointing results so right now we have

00:04:03.980 i think this tendency especially when we're talking about inflation for our leaders to just say well

00:04:08.660 canada is a passenger in a global trend right now it's like oh there's inflation in the uk so

00:04:13.580 inflation in canada is not really our fault it's everywhere whereas you're saying that in canada there

00:04:17.700 actually is something that's a very specific and uniquely canadian phenomenon that's driving down

00:04:23.020 growth very much so and it's because business investment in this country over the last decade

00:04:29.160 has fallen 20 percent while in the u.s it's grown 20 percent over the same period uh and the importance

00:04:35.960 of business investment is that it embeds technological changes it drives your competitors going forward

00:04:42.340 that's why again over the last decade our exports have fallen slightly while the u.s has continued

00:04:48.480 to grow so uh it's something very specific and it's you know it's very specific to business investment

00:04:54.520 and exports uh yes we've tried to fluff up growth by having uh low interest rates and having large

00:05:01.260 government deficits and spending and having a housing boom but none of those are sustainable in the

00:05:06.360 long run if you don't have investment jobs and exports we're an exporting nation we count on exports

00:05:13.080 for one third of our income uh between exports and business investment you have well over a third of our

00:05:18.920 economy going absolutely nowhere uh this is going to result in stagnant incomes over the longer term

00:05:25.480 now how much i mean you talk about how culture changes slowly here and i'm wondering how much of it

00:05:31.860 is really influenced by changes in government or if the culture has sort of an evolution in this country

00:05:37.820 that is influenced yes but not as radically by policy changes well that's the one thing i i'm optimistic

00:05:46.580 about is that culture does change slowly i think there really is a a desire or still an impulse for

00:05:55.360 innovation and entrepreneurship in this country i don't think you can kill that off but at the same time

00:06:00.800 you know you go back to you you talked about the td uh report economists have been recommending that

00:06:06.980 governments in this country do a lot of things that the governments have actually done you know

00:06:11.640 we've adopted free trade with all the major g7 countries we have the highest level of education in

00:06:17.280 the g7 we subsidize research and development uh like crazy as shown by the the huge subsidies given to

00:06:24.860 the auto firms recently so we've done a lot of things and yet our growth continues to sputter

00:06:30.440 and that's why i go back to saying it's probably more than just a little tweak of a policy here or

00:06:36.900 there we have to go back and look at how it is we talk to the business sector internationally and in

00:06:43.120 the in this country to make firms want to invest and spend in this country now i want to just preface

00:06:49.780 this by saying what i'm about to argue is not at all my point but i i'm trying to say you know how

00:06:54.480 would the government right now federally respond to your point and they'd say well just look at the

00:06:59.100 13 billion we've given a volkswagen look at the billions we're handing out in corporate subsidies

00:07:03.720 that's that's uh showing our investment in business our investment in entrepreneurship what

00:07:08.840 what would you say to that because that's the government's answer to you saying there's not a

00:07:12.840 business climate here is to throw money at these companies yeah well i think what the government

00:07:16.860 really revealed itself was when the head of germany came over last winter in the middle of a

00:07:22.120 major crisis i mean i was in europe last winter trust me it was cold it was cold in restaurants i

00:07:28.360 mean they turned the temperature down they were they ran out of natural gas so the head of germany

00:07:32.500 comes over here he asked canada to step up natural gas exports we respond by saying no there

00:07:38.680 isn't a business case for it yeah are you kidding news to the people wanting to buy it yeah here's a

00:07:43.760 head of a g a fellow g7 country who we should be disposed to help out just because he's a fellow g7

00:07:50.120 never mind it he's a good customer asking us to increase our energy exports and we say there

00:07:55.740 isn't a business case uh that's farcical uh we won't build pipelines we we just uh discourage oil

00:08:03.460 and gas investment uh that's the type of and and the you know oil and gas is the largest industry in

00:08:09.480 this country not auto manufacturing uh this is oil and gas is twice as important as the auto industry

00:08:16.240 industry so yes you can go out and give subsidies the auto industry whether or not they'll pay off

00:08:21.420 in the long term i don't know as uh many people pointed out you know it's not at all clear that

00:08:27.040 who's going to win the electric vehicle wars in the future um but you know while we're doing that

00:08:34.400 we're discouraging an industry that is twice as important just the oil and gas industry by itself

00:08:39.840 never mind adding in pipelines and industries like that so i think the government revealed its true

00:08:46.240 colors about the way it talks to the to the business community in the way that it responded to

00:08:52.560 schultz's request last winter is your view i mean because to go back to the global picture here and i

00:08:58.880 think inflation has probably been one of the most acute measures of of the the state of the economy if

00:09:04.000 you were to talk to most people because it's the one they're seeing but in general unemployment and

00:09:07.920 and all of this factors in as well but but it's your view that if canada had implemented some of

00:09:11.840 the stuff you're talking about that we would have been a little bit more insulated from some

00:09:16.400 of these global trends over the last couple of years oh i think certainly um partly because you know

00:09:23.600 uh the biggest source of inflation over the last year was food and energy and the government

00:09:28.000 stands back and goes oh that's something we don't control actually because we import so much food

00:09:33.760 and our our gasoline prices are directly linked to the us every time the canadian dollar drops uh

00:09:40.880 that costs consumers uh higher food and energy and and other prices for imported goods it's quite

00:09:47.440 striking that when the last winter when the oil and gas prices blew through the roof our dollar didn't

00:09:54.480 do anything and it's because the international community understood that there our government would not

00:10:00.400 allow more investment in in the oil and gas industry and we wouldn't be able to profit from that if we

00:10:05.520 allowed the oil and gas industry to profit from those high prices the dollar would have risen gas

00:10:11.040 gasoline and food prices would have come down and inflation would have been lower so there's a

00:10:15.680 direct connection between the two philip cross is with us he is i mean you're basically with

00:10:21.120 everywhere you're with the fraser institute mcdonald laurier formerly statistics canada and you produce

00:10:26.320 great work wherever you are thanks so much for coming on philip always good to talk to you my

00:10:30.640 pleasure thanks for having me on thanks for listening to the andrew lawton show support the program by

00:10:35.200 donating to true north at www.tnc.news

Juno News - July 31, 2023

Canada’s standard of living is falling behind

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