Without generating real growth, Canada will fall further and further behind.
The TSX dropped today, amid growing concerns about global economic growth.
The Canadian Dollar dropped to 78.14 cents US, a six-week low.
Unfortunately, these short-term indicators aren’t outliers for Canada.
Canada’s economic growth – our real economic growth as measured by per capita GDP – has been weak for some time, and there are no indications this will change under current Liberal policies.
False ‘growth’
When Canada has experienced ‘growth’ in recent years, it’s been based upon inflation and large population increases.
Of course, this isn’t ‘real’ growth.
What matters is per-capita GDP growth, the kind of growth that points to actual rising productivity and raises living standards.
To get back to that kind of real growth, there are five simple steps Canada can take:
Eliminate the carbon tax
The carbon tax is an inflationary policy.
It makes life more expensive.
And it discourages investment.
Eliminating it would be an important step towards improving real, per-capita GDP growth.
Cut income taxes
Beyond eliminating the carbon tax, Canada should cut income taxes.
This would leave more money in the pockets of Canadians, increasing the purchasing power of our Citizens. Since individuals can best decide how to spend their money compared to the government, this will increase overall economic efficiency and generate more real growth.
Restrain federal spending
There is a point at which government spending shifts from being an economic benefit, and becomes a hinderance.
With Canada experiencing high inflation and weak growth amid massive government spending, we have clearly reached that point.
Unrestrained federal spending not only drives up our debt – meaning more money is spent on debt service – but it damages consumer and investor confidence. A credible plan to restrain federal spending would provide Canadians with more confidence in the future economic stability of the nation, confidence that helps people make more long-term focused financial decisions.
Remove development restrictions
Canada is a nation with almost unlimited land, yet our housing prices resemble those of extremely dense global enclaves.
This is due in large part to both the rampant money printing by the Bank of Canada, and also restrictions on development that artificially restrain the supply of housing.
These restrictions incentivize the construction of condos rather than single-family homes, and seek to pack more and more people into denser areas, rather than taking advantage of Canada’s immense amount of space.
Removing those development restrictions would incentivize more housing construction, and would over time help to bring down the cost of housing. This is essential, since it would enable a larger number of Canadians to afford a home, and would also move our economy away from our dangerous dependence on housing as an economic driver.
Expand our energy sector
Canada should be one of the wealthiest nations on Earth.
Our per capita income rival the wealthiest energy-rich nations.
And I’m not just talking about the oil-rich parts of the Middle East.
Consider that Norway’s per-capita GDP is $67,294 USD.
Canada’s per-capita GDP is $43,241 USD.
Given our close ties to the US, our high level of technological advancement, our immense resource abundance, and our relatively small population, Canada’s per-capita GDP should be much higher than it is.
Unfortunately, the Liberal government has sought to simultaneously weaken the energy sector, while raising taxes and massively expanding government spending.
Perhaps that spending would be somewhat affordable if the energy sector was growing at a rapid pace, but since the Liberal government has often taken an adversarial stance against the energy sector we end up funding that spending with more and more borrowing.
Just imagine how much better life in this country could be if the government got spending under control and if our energy sector was supported…
Simple steps to generate real growth
The five steps I mentioned above aren’t complex.
They are based upon simple economic reality and time-tested principles and will put Canada on the path to real economic growth.
Spencer Fernando
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