Canada’s Unsustainable False Economy

When growth isn’t really growth, we have a serious problem.

Credit for the idea of writing this article goes to Darshan Maharaja, who said this on Twitter:

““Unsurprisingly, our economy is increasingly ‘fake,’ as in ‘growth’ isn’t real growth in productivity, but is growth in population and in the money supply, while per capita GDP weakens.”

This excellent point needs an article of its own, Spencer.”

Before getting into a discussion on Canada’s fake economy, I would encourage you to visit Darshan’s website,, where you can find some deeply informative commentary and analysis of the issues facing Canada and the world today.

An unsustainable kind of ‘growth’

There are two ways a person can grow in height:

They can grow naturally, as part of the early-life aging process, or they can artificially inflate their height with footwear.

If someone tells you that they’ve gained a foot in height, that doesn’t tell you anything about whether the height increase is real, or artificial.

The same is true for an economy.

In terms of GDP, an economy can grow through a rise in productivity, typically seen when technological advancement makes it easier to produce more in a shorter amount of time and with less effort.

An economy can also ‘grow’ through increasing inflation, a higher population, and a burst in government spending of borrowed money.

The first type of growth – productivity – is equivalent to a person growing naturally, while the second is equivalent to a person putting on some higher shoes to look taller than they are.

Now, which type of growth has Canada seen recently?

I think we both know the answer to that.

Productivity problem

Canada’s economic productivity has been weak for quite a while:

“Through the 1960s and ’70s, new equipment and machinery allowed Canadian workers to produce more with less, and a boom in international trade meant businesses had access to massive overseas markets to sell that output. Productivity grew roughly two to three per cent every year, contributing to average economic growth of four to six per cent. Over the past 20 years, however, things have slowed considerably. Annual economic growth has averaged about 2.2 per cent, and mean productivity growth is just 0.8 per cent per year.”

While some may claim this is an issue impacting all advanced economies, the fact is that Canada lags far behind our neighbours to the south.

Here’s what the Business Council of Alberta says about it, noting that differences in hours worked accounts for only a small percentage of the difference:

“To put the difference in perspective, Canadians make around $54,000 CAD per year on average while their American counterparts make around $67,000 CAD. In other words, by traveling just a few hours south, incomes increase almost 25% on average. What is it about the US or Americans that is different?

Part of the gap is unrelated to productivity: Americans work more hours than we do—about 3.5% more. If Canadians worked the same number of hours as Americans, they would instead make closer to $56,000. That closes the gap a little, but the remaining 20%-point disparity is due to a difference in the value of output produced per hour worked (i.e., productivity). While the average American worker produces $66 of value per hour, the average Canadian workers produces just $50 of value per hour.”

Lack of competition

As we know, many sectors of Canada’s economy are dominated by just a few large companies. This, combined with increasingly onerous taxes and regulations provides a barrier to entry for new competitors, entrenching the position of those already at the top.

This creates a lack of competition, and a lack of competition is devastating for innovation.

The more companies compete for a market segment, the more they must seek to innovate and outdo each to provide a more valuable service at a lower price.

But all too often, once a company reaches a decent level of success in Canada, they can coast along with implicit government backing.

Interestingly, while reading an article that mainly focused on the differences between the US economy and the Chinese economy, there was this anecdote about Canada:

“The highest market concentration of enterprises—meaning only one or two companies in a particular industry—is not in China but in Canada.”

That’s a serious issue.

China is a country with an all-powerful centralized party in charge, a party that has a hand in nearly every business, and directs large sections of the economy through state owned enterprises. And yet, Canada has a higher market concentration of enterprises than China does.

This is why it’s not hyperbole when people refer to Canada as socialist, since this country has a serious problem with a lack of competition.

Ironically, in the few areas where a lack of competition can be good (industries directly essential to national security), our country often allows foreign countries to buy out our companies.

Surging immigration

With competitiveness a serious problem, and productivity growth quite weak, our ‘leaders’ attempt to create the illusion of growth through large yearly population increases.

Canada’s yearly immigration level has led us to bring in about 33% of the number of people who enter the US, despite Canada having about 1/9th the population of the United States.

On a per capita basis, our immigration levels have been higher than the US for quite some time.

This means that when we compare Canadian GDP growth and American GDP growth, we must account for the fact that much of Canada’s ‘growth’ is based on a more rapid population increase percentage.

We can see the impact of this when looking at the statistic that really matters:

GDP per capita.

In 2012, Canada’s per capita GDP was $52,669 USD.

In that same year, America’s per capita GDP was $51,602 USD.

In 2020, Canada’s per capita GDP was $43,241 USD.

In that same year, America’s per capita GDP was $63,543 USD.

This means that while our economy may have the appearance of growth due to large yearly population increases, the average Canadian is actually getting poorer. 

The Inflation scam

So, we’ve seen that Canada has a competition problem, a productivity problem, and a per capita GDP problem that the politicians are trying to mask with higher and higher immigration.

Now, there’s another problem.

Surging inflation.

Prices are what makes market economies and civilization possible.

Prices convey a stunning amount of information – far too much information for any one person to truly understand – into a clear number.

If car companies have a serious and deeply complex engineering issue that makes it more difficult for them to produce cars, you don’t need to know the issue, you only need to be able to see the impact of it, which will be demonstrated in the price.

Prices – when not manipulated by governments – enable us to make good decisions with our money, and over-time ensures a far more efficient and beneficial allocation of resources.

Over the past two years, governments have repeatedly ordered massive restrictions on economic activity, shutting down many businesses, and imposing restrictions on businesses. Aside from the issue of whether governments should have that power (they shouldn’t), you would expect to have seen a massive drop in prices.

Stock prices should have fallen, housing prices should have fallen, and prices overall should have declined.

An economy heavily restricted by the state should have looked like a much poorer economy.

Indeed, it is much poorer, but we’ll get to that in a minute.

Instead of declining prices, prices have surged, with inflation hitting Canadians hard.

Asset prices are way up, with the housing market surging about 30% last year, something that should never have happened in a deep recession.

This took place because – rather than allow prices to adjust to the significant decline in economic activity – governments flooded the economy with fiat currency.

They printed money, and distributed it widely.

This was done to maintain a politically beneficial illusion, making it seem as if the economy hadn’t been deeply damaged.

Yet, you can’t evade reality, you can only mask it for a time.

Instead of prices falling, the value of our money fell.

Sure, there was no deflation in the price of goods, but the purchasing power of your hard-earned money deflated instead.

Thus, by purposely generating higher and higher inflation, governments sought to mask the significant decline in our economy.

But that decline still happened.

Deflation would have been preferable, because it would have provided realistic price signals that would have enabled a better allocation of financial and productive resources. By contrast, the money-printing binge hid the true cost of government restrictions and lockdowns, and distorts price signals, leading to severe misallocation of resources.

Just look at our housing market, which makes up a huge percentage of our economy and is now basically propped up by an endless government-debt and money printing binge that cannot be sustained.

A false economy

Add all of this up, lack of competition, weak productivity, and higher immigration combined with higher inflation to mask our serious decline in per capita GDP, and it becomes clear that Canada’s economy is largely fake and unsustainable.

We need to accept that a difficult readjustment and return to reality is needed, and that government must step back and get out of the way.

Spencer Fernando


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