Over the last ten years real GDP per capita grew just 0.8 per cent a year on average in this country, its lowest rate of growth since the 1930s. Total GDP has been growing because of our growing population. But GDP per person has been essentially stagnant. This extended period of slow growth has widened the gap between per capita growth in the United States and Canada, demonstrating that the causes of our slumping growth are domestic, not external.

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Philip Cross: Canada's worst decade for real economic growth since the 1930s Back to video

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From the fourth quarter of 2016 to the end of 2022, real per capita GDP rose 11.7 per cent in the U.S., but only 2.8 per cent in Canada. The U.S. outgrew us before, during and after the pandemic. From 2016 to the end of 2019 it outpaced us by 3.5 percentage points. During the worst of the pandemic, in the first half of 2020, per capita real GDP fell 9.7 per cent in the U.S. versus 13.2 per cent here. And since mid-2020, it has grown 15.3 per cent in the U.S. versus only 14.1 per cent here. The Americans’ ability to sustain growth over the past decade shows that our stagnation was not the inevitable result of population aging or the exhaustion of technological innovations — which are hitting them, too — but instead reflects factors under our control.

There is growing recognition that we need to address our faltering rate of economic growth. Business leaders have been ahead of the curve on this issue. In early 2019, The Business Council of Canada launched its Task Force on Canada’s Economic Future, which focused on six policy areas where action is needed to enhance Canada’s economic prospects. Former finance minister Bill Morneau wrote last year that one reason he ran for office in 2015 was that “Canada’s economic growth had been stalled for two decades or more and it needed to be resuscitated.” As minister, he did appoint an Advisory Council on Economic Growth, but the growth slowdown actually worsened during his time in office. Another pro-growth initiative is the bipartisan Coalition for a Better Future, headed by former cabinet ministers Lisa Raitt (a Conservative) and Anne McLellan (a Liberal). Its objective is to build consensus on how to encourage growth, raise productivity, boost competitiveness and manage climate policy.

The most obvious sectoral sources of our slow growth are in business investment and exports. Since the fourth quarter of 2014, business investment in this country has fallen 17.6 per cent in volume even as it has risen 23.5 per cent in the U.S. Meanwhile, since peaking in the third quarter of 2015, the volume of Canada’s merchandise exports has fallen 0.4 per cent, while in the U.S. it has risen 14.0 per cent — this despite the stimulus of a 25 per cent devaluation of the Canadian dollar since 2014.

Together, exports of goods and business investment in plant and equipment account for fully 37 per cent of our economy. When over one-third of an economy contracts over an eight-year period, overall economic growth is bound to be hit hard. But that’s especially true for investment and exports, which contain Canada’s most productive and innovative technologies: they have to, they face the most pressure to compete and innovate. (As Statcan puts it, “exposure to foreign markets and improvements in productivity go hand in hand.”)

Slumping business investment in Canada is a particular concern. There is growing understanding that Canada has wasted a decade of low interest rates on government debt and housing and not enough in business investment. Low levels of investment since 2014 resulted in an outright decline in investment per worker, from $16,000 in 2014 to $11,900 in 2021. The long-run implications of falling capital-to-worker ratios are worrisome. “In the long run,” Stern School of Business Professor Thomas Philippon reminds us in his book The Great Reversal, “GDP and the capital stock tend to grow at the same rate.”

Beyond their direct impact on growth, the persistent slumps in business investment and exports point to structural shortcomings in Canada’s economy, including low rates of business formation, policy uncertainty, regulatory barriers to investment (especially in the resource sector), restrictions on internal trade, faltering confidence among foreign investors and low levels of productivity and innovation.

One manifestation of chronically weak business investment and low productivity is the OECD’s forecast that Canada’s per capita GDP growth between 2020 and 2060 will be the lowest among its 29 member nations. This underscores that, without fundamental changes in our approach to growth, Canada’s economic anemia will persist. Returning to faster economic growth requires, not one-time debt-financed boosts to income transfers, but harnessing the potential of Canada’s innovators and entrepreneurs.

Philip Cross is a senior fellow at the Fraser Institute.