Canada’s Declining Per Capita GDP Is A Brutal Indictment Of Liberal Economic Policy

The Liberal government appears to have given up on per capita GDP growth as they simultaneously pursue a rapid increase in immigration levels while imposing productivity-reducing taxes & regulatory policies.

Take a look at the following chart:

Progress of the human species: Global GDP per capita Source: The Maddison-Project,, 2013 version.

This simple chart contains within it an explanation of all the significant advances in human lifespan, human health, technological advancement, and the massive increase in our standard of living.

If we want to make life better in the long-term, there is no substitute for increasing per capita GDP.

The dream of a better life requires higher per capita GDP

When people talk about the ‘Canadian Dream’ or the ‘American Dream,’ the post WW2 economic ‘miracles’ in countries like Japan and Germany, or the rise of the ‘Asian Tigers’  (Singapore, Taiwan, Hong Kong, & South Korea), what they are really talking about are dramatic increases in per capita GDP.

When people talk about the Great Depression, the Great Recession, ‘economic malaise,’ and ‘economic collapse,’ they are talking about dramatic declines in per capita GDP.

Why per capita GDP is the number to look at

When assessing the total economic power of a country, a look at the total GDP figure makes sense. After all, a country with a total GDP of 20 trillion will be far more powerful than a country with a total GDP of 200 million.

But when it comes to how people within a country actually live – what kind of standard of living they enjoy – per capita GDP is what matters the most.

Per capita GDP is simply the total GDP of a country divided by the population. This tells us how efficient and productive an economy really is.

For example, Indonesia has a total GDP of $1.2 trillion USD, while Switzerland has a total GDP of $800 billion USD. However, Indonesia’s population is 273 million, while Switzerland’s population is 8.7 million. You would then expect that people in Switzerland have a much higher standard of living than people in Indonesia, and you would be correct.

With a per capita GDP around $92,000 USD, Switzerland is far ahead of Indonesia’s per capita GDP of around $4,300 USD.

This is a stark example, but it serves to illustrate the point that if we want to understand what kind of standard of living people have, we have to look at per capita GDP.

What about the United States?

Those who criticize the idea of focusing on per capita GDP often cite the United States. While the U.S. has a per capita GDP of about $70,000, life expectancy in the United States is a few years lower than in some comparable Western nations.

The United States also has a significant disparity between those at the top of the income distribution and those at the bottom.

Now – and I want to word this carefully to avoid giving the impression of dismissing real issues – but many problems in the United States are actually problems caused by the immense wealth of the country.

For example, the leading cause of death in the United States is heart disease, with diabetes and stroke high on the list. Obesity is more prevalent in the United States than in most countries, which of course heightens the risk of heart disease, diabetes, and stroke.

Obesity is also more prevalent among lower income Americans than among those of middle or high incomes.

Now, imagine going back 200 years and telling someone that obesity (AKA long-term excess food consumption) would be a sign of poverty.

They would think you were insane. For nearly all of human history, poverty and a lack of access to food were so inexplicably linked as to be considered almost the same thing.

We even have terms like ‘fat cats’ that people use to negatively describe the wealthy. Fascist and Communist regimes regularly printed propaganda posters depicting American and British leaders either as pigs, or as morbidly obese individuals in order to signify the wealth of the democratic capitalist world.

‘Thin and starving’ was associated with being poor, while ‘fat and satisfied’ was associated with being rich.

Again, this is not to pretend that lower income individuals don’t face serious challenges in the United States. But, we must point out that the way in which poverty manifests in the United States would not have been at all relatable to anyone’s sense of poverty for most of human existence.

Other key causes of death in the United States include auto accidents, which is unsurprising given the high rate of car ownership in the United States and the extensive high-speed highway system in the country.

Again, those are problems of wealth, not of poverty.

We also must not ignore the fact that the United States also manages to field the world’s most powerful military – providing explicit protection to Canada and much of Europe, along with implicit protection to Japan, South Korea, and Taiwan, all while providing for a relatively high standard of living for their own population compared to most of the world.

Only a country with a high per capita GDP could accomplish this.

A high per capita GDP gives a country options

Even at the nadir of the Great Depression, the United States was a wealthy country (for the standards of the time of course). When they decided to ramp up military production, they were able to build a military-industrial-complex that remains unrivalled, and which drowned the Axis in bombers, fighters, tanks, ships, and artillery.

A high per capita GDP gives a country options.

Many of the health/life expectancy problems in the United States could be addressed with a small shift in spending, or through an innovation in the robust U.S. private sector. In fact, with the rise of anti-obesity drugs, it appears that is already happening.

High per capita GDP countries are almost all democracies, which is no surprise given the fact that democracies tend to protect private property rights and encourage freedom of expression – both of which are essential to innovation and rapid adaptation to a changing world.

Now, if a higher per capita GDP gives a country more options, then it stands to reason that a lower per capita GDP deprives a country of options. That is obviously the case in poor countries, as they struggle to address basic problems. Many poor countries experience regular blackouts, collapse of infrastructure, massive destruction during natural disasters due to poor building quality, and immense social dysfunction.

And this is why nearly every country on Earth seeks – one way or the other – to improve their per capita GDP.

The fundamental reality is that human progress and a rising per capita GDP are one in the same.

With this understanding in mind, let’s take a look at where things stand in Canada.

Canada’s economic decline

Canada is in a state of economic decline.

This is not a political statement, or an opinion.

It is an objective fact:

“We estimate Canada will not recover its 2019 income per capita until at least 2027, based on the federal budget’s projections for GDP growth and likely population growth.”

“10 yrs ago, #Canada’s GDP per capita was on par w/ that of the US. Today, US GDP per capita is an astonishing 39% higher than Canada’s. @awudrick&@ExnerPirot explain how the result is a consequence of misguided policies implemented by successive govts:”

“Mortgage growth running at its lowest levels since the 1990s, retail spending sharply negative on a per capita basis, GDP contracting. The recession has already arrived in Canada despite human QE trying to cover it up.”

“Human Quantitative Easing”

Here’s how Forbes describes quantitative easing:

“Quantitative easing—QE for short—is a monetary policy strategy used by central banks like the Federal Reserve. With QE, a central bank purchases securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses. The goal is to stimulate economic activity during a financial crisis and keep credit flowing.”

The specific description of QE aside, in general parlance it has largely become another way to describe ‘money printing’, even if that isn’t technically correct. Still, if a country is at the point in which they are engaged in quantitative easing, it’s a sign that economic activity has slowed substantially and fiscal policy isn’t getting the job done to address the issue. It’s no substitute for productivity growth, rather it’s a sign of desperation or at least significant concern.

So, when Steve Saretsky says in the above post that “The recession has already arrived in Canada despite human QE trying to cover it up,” he’s referring to the fact that Canada’s economy is only becoming larger due to population increases, rather than actual productivity growth.

Canada’s population growth is significantly exceeding our GDP growth. Thus – as mentioned near the outset of the article – Canada is becoming poorer because there is a higher ratio of people compared to our total GDP than there was before.

On a per person basis, Canadians are getting poorer.

And the effects are adding up.

Canadian consumer spending slows, while credit card balances rise

According to the Equifax Consumer Quarterly Credit Trends Report for Q2, Canadian consumer spending is pulling back as consumer debt is rising.

“Canadian consumer debt reached $2.4 trillion, according to Equifax® Canada’s most recent Market Pulse consumer credit trends and insights report. Despite a sluggish mortgage market, non-mortgage debt showed a seasonal rise in the second quarter of 2023, with credit card balances reaching an all-time high of $107.4 billion. Against the backdrop of rising interest rates, credit card spending growth showed signs of slowing.

“Canadians are demonstrating a shift in their spending habits due to the current economic volatility,” explained Rebecca Oakes, Vice-President of Advanced Analytics at Equifax Canada. “With various factors at play, individuals and households are actively adapting their financial strategies to navigate this dynamic landscape.””

The report goes on to note that credit card balances have hit a record high, including “a notable increase in debt among subprime and deep subprime consumers.”

Significantly, the situation is even worse than it appears. The average non-mortgage debt per consumer has reached $21,131, which Equifax described as a “marginal uptick.”

However, the uptick was marginal because of an influx of new borrowers, which brought the average down:

“This increase was masked by the influx of new credit users in Canada who have much lower debt levels when they first become credit active. The number of credit active consumers with less than 24 months of credit activity went up by 37.1 per cent while their average non-mortgage debt went down by 10.2 per cent when compared to Q2 2022. In contrast, consumers with a credit history exceeding two years had an average non-mortgage debt of $22,710, up 1.9 per cent.”

So, those who have been borrowing for quite some time are falling further into debt, while more Canadians are taking on debt to try and make ends meet.

At the same time, the rate of the increase in credit card spending has declined, as more money is going towards the costs of servicing debt.

All of this points to a country in which more and more people are just barely hanging on.

Debt can’t mask decline

Understandably, people do what they can to hold on to their standard of living. Humans tend to be more focused on protecting against losses than achieving gains. As an example, people will react much more negatively to a 5% pay cut than to a 5% rise in prices, even though the actual impact on purchasing power is the same.

People will fight hard to at least hold on to what they have.

And so, as our per capita GDP declines, Canadians have been taking on more debt to try and make up the growing gap between our earnings and the cost-of-living.

But that can’t last forever.

An increase in debt can temporarily mask economic decline, but it can make it worse in the long-run, since the pain of deleveraging is added on to the pain of declining purchasing power.

Population increases can’t mask this either, since Canada’s problem isn’t a lack of people, it’s a lack of real GDP growth.

A Liberal MP comes so close to getting it

Now, when Canada’s moribund per capita GDP situation is discussed, Liberals MPs and Liberal partisans will often talk about how this is a global issue, in which the federal government can’t really be blamed.

And insofar as they are talking about the sharp GDP contraction that took place immediately following the emergence of Covid-19, they are correct. The virus emerged from China, and countries around the world reacted with lockdowns. However, after that initial period of fear and uncertainty, many governments went off in different directions. Some chose to open up more rapidly, while others chose to remain locked down for longer and to extend draconian measures.

The Canadian government chose the latter.

Additionally, the Liberals chose not to reassess the impact of policies like the carbon tax.

A prudent and reasonable government would have understood that repealing the carbon tax – and ending their campaign against the oil & gas sector – would have helped to provide some essential relief to the Canadian People.

A prudent and reasonable government would also have understood that – following the initial surge in government spending/money printing, federal spending needed to be brought under control to prevent a surge in inflation.

A prudent and reasonable government would have understood that pursuing massive yearly population increases at a time of depressed growth and overburdened social services would only add to the economic woes of Canadians.

But instead, the Liberal government chose to double-down on the very same policies that have contributed to Canada’s declining per capita GDP, not to mention our completely unhinged housing market.

Amazingly, a Liberal MP came so close to getting how bad things have been under her party’s watch:

Of course, Liberal MP Arielle Kayabaga then pivoted to trying to claim the Conservatives were making fun of her, even though they simply pointed out her own words:

Of course, MP Kayabaga and other Liberal MPs probably doesn’t want to really consider the implications of how much worse the housing affordability issue has gotten under the Liberal Party.

CDN media

You’ll notice the massive and ongoing spike in housing prices relative to disposable income that just so happens to take place under the Liberal government.

Unfortunately, it’s not only our unaffordable housing that makes Canada stand out.

Canada’s decline makes us an outlier

This is why the facts matter. Because it’s not that Canada is facing the same situation as other peer nations. Rather, we are set to do worse than all other peer nations:

“Canada is one of the few advanced countries where real incomes are lower than before the pandemic. Real GDP per person is $55,170, compared with $56,379 in 2019, meaning the economy is generating $1,200 less income per person, or $2,830 less income per household, than it was four years ago.

We estimate Canada will not recover its 2019 income per capita until at least 2027, based on the federal budget’s projections for GDP growth and likely population growth. The OECD forecasts that Canada will be the worst-performing advanced economy over both 2020-30 and 2030-60, with the lowest growth in real GDP per capita. The principal reason is that Canada is expected to rank dead last among OECD countries in productivity growth over most of 2020-60.”

This is something that is happening entirely on the watch of the federal Liberals.

The question of course is why?

Why is Canada’s per capita GDP growth so weak under the Trudeau Liberals?

What about the policies of the Liberals has been so damaging to real productivity growth in Canada?

Fundamentally, the Liberal government has – either through some sort of ideological animus or through incompetence – proven to be remarkably hostile to the ways in which productivity growth (and thus higher per capita GDP) is generated.

Earlier in their time in office, the Liberals implied that many small business owners were tax cheats, and instituted a variety of policies that have resulted in a higher tax burden for small businesses. As noted by Kalfa Law in a great explanatory article written when the Liberals made substantial changes to small business taxation, despite the Liberals following through with Stephen Harper’s plan to cut taxes for small businesses, the collective impact of other Liberal tax policies has outweighed that reduction:

“If we consider the larger economic context, we see a picture emerging that supports the view that small businesses are paying a great deal more in tax than ever before.

Along with the SBD reduction, 2019 has also ushered in the carbon tax, which will increase almost all goods and services that a small business relies on, including food, heating, gas, inventory, etc.

The enhanced CPP has also kicked in, increasing the tax from 4.95 percent to 5.1 percent. This means that owners of private companies will be paying an extra $85 per employee/per year in CPP premiums. This is slated to continue on an upward swing up until 2025, at which time it is expected that business owners will be paying an extra $645 per employee per year in CPP premiums.

Finally, with the government’s dis-incentivizing passive income growth within corporations, there is the consequent pressure to withdraw retained earnings in fully distributed dividends. These dividends are taxed at a higher rate (combining personal and corporate tax rates), than corporate tax rates alone.

Effectively, this not only wipes out the benefits of the SBD, but businesses will now pay more taxes in fully distributed corporate earnings than before.

In addition, with the new passive income limitations, more corporate active income will be subject to the higher corporate tax rate of 26.5 percent than before the provision (while less income will be subject to the lower SBD rate of 12.5 percent).

The bottom line?

Small business owners will be paying more in taxes overall in 2019 than they did in 2018, not less.”

Since small businesses are such an important source of job creation and innovation, weakening those businesses weakens the economy.

Productivity growth also requires the efficient allocation of resources. This is generally best accomplished by the private sector through the price mechanism. Government spending tends to be less efficient, particularly when that spending is directed towards increasing the bureaucracy. So of course, that’s exactly what the Liberals did.

The cost of the federal government is up by a stunning $151 billion PER YEAR under the Liberal government. The federal public service is over 30% larger than it was when the Liberals took office.

This represents a massive diversion of financial resources – not to mention workers who would have otherwise found jobs in the private sector.

That diversion of resources significantly reduces the efficiency and productivity of the Canadian economy.

A strong economy also requires a strong investment environment. Here again, the Liberals have made things worse. When potential investors see someone like Steven Guilbeault in a position of power, they will understandably think twice about investing in this country, especially given that the much more pro-business United States is right next door.

Speaking of resources, the carbon tax and anti-pipeline legislation obviously represents a significant impediment to the growth of Canada’s natural resource sector.

It’s no coincidence that the United States is surging ahead of Canada in terms of per capita GDP, since they are embracing the opportunity to sell more LNG to countries like Germany and Japan, while Canada languishes under the leadership of a Prime Minister who said there was “no business case” for an expansion of those exports.

If we don’t utilize our resources, we will lose out, plain and simple.

Let’s also not forget that Liberals have shown tremendous hostility to social media/tech platforms, at the worst possible time.

As the digital economy grows year after year, any country that wants to achieve growing prosperity must embrace technology and encourage the creativity of the populace.

The Liberals are doing the opposite.

Justin Trudeau compared American tech companies to Canada’s enemies in World War Two, and the government has – through Bill C-11 and C-18, made it far tougher for Canadians to thrive on the world’s largest platforms.

All of this was done at significant expense in order to prop up struggling legacy outlets – representing the government throwing good money after bad.

And on top of all of this, the Liberal government decided now is the time to institute huge population increases.

From a logical perspective, those are the policies you would implement if you were trying to slash per capita GDP, so it’s really no surprise that lower per capita GDP is exactly what has resulted.

An indictment of Liberal economic policy

At the very least, a government should try to do no harm.

The Liberals have been unable to even manage that.

The cumulative impact of their economic policies has been for Canadians to become worse off, and for our country to fall further and further behind our peers.

This is a brutal indictment of Liberal economic policy, and there is no amount of political spin that can change the fact that the Liberal economic agenda has been an utter failure.

Spencer Fernando

Photo – YouTube


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