MONTREAL — Canada has fallen out of the top 10 in a ranking of the world’s most competitive economies, a sign that Canadians may have a harder time succeeding financially in the coming years.
The 2019 edition of the IMD World Competitiveness Ranking places Canada 13th out of 63 countries, the worst performance in the annual survey’s history, which goes back to 1997.
The country is being beaten by both aggressive free-market economies like Singapore and the U.S. (first and third, respectively) and by progressive countries known for their labour protections and high wages (Denmark, the Netherlands, Norway and Sweden).
Through the 1990s and early 2000s, Canada consistently ranked among the top 10 most competitive economies, but the country began a slow descent around 2015, when oil prices collapsed ― though that is only a small part of the reason for the decline.
And this problem can’t be pinned on Trudeau’s Liberals or any one previous government ― it’s a long-term trend in Canada’s economy.
A competitiveness index isn’t exactly a measure of how competitive a country is against other countries; rather, it’s a measure of how productive a country is. Productivity can be defined simply as “how much you get back for the effort you put in.” The more you get back for your work, the more “productive” an economy.
“Productivity is important because it has been found to be the main factor driving growth and income levels,” the World Economic Foundation says. “And income levels are very closely linked to human welfare. So understanding the factors that allow for this chain of events to occur is very important.”
So what’s going wrong in Canada?
A lot of long-term problems in Canada’s economy seem to be finally catching up to us, and one major issue that expert after expert cites is Canada’s relative lack of innovation and creativity.
The country’s business leaders have a reputation for being cautious, and following the crowd rather than taking risks on new ideas. That means Canada has fewer opportunities to create new businesses, and it makes the country uninteresting for foreign investors (except those looking to park cash in our housing market, that is).
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“We’ve seen less money coming into Canada, it’s not attracting its fair share of foreign capital,” said Craig Alexander, chief economist at Deloitte Canada and co-author of the consultancy’s Canadian competitiveness scorecard.
Additionally, Canada has a problem “scaling up” new businesses: We’re pretty good at launching new small enterprises, but it’s unusually difficult to turn a successful small business into a large one, Alexander says ― something that IMD itself echoes in its 2019 report.
Alexander lists off a number of smaller issues that are hurting Canada’s competitiveness today, including the fact the country is falling behind others in building infrastructure, and the U.S. tax cuts a Republican-dominated Congress passed in 2017, which means that Canadian businesses are seeing higher tax rates than U.S. ones for the first time in years.
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Which highlights another aspect of all this: In our globalizing economy, many other countries are becoming more aggressive in chasing business opportunities.
“It isn’t necessarily that things are getting more difficult in Canada, it might be other countries are making more progress,” Alexander said in an interview with HuffPost Canada.
Talent is our strength
Alexander says human resources are Canada’s real strength ― our ability to attract among the most skilled and talented people from around the world. The IMD report backs this up, showing that Canada ranks sixth in the world when it comes to talent.
But even on this metric, things are starting to look shaky. Canada has been experiencing a historic labour shortage over the past few years, and without the right people, businesses can’t expand. The shortage is now beginning to hold the economy back.
“There must be a way of better integrating immigrants, perhaps by facilitating training and recognizing foreign qualifications,” National Bank Financial economist Krishen Rangasamy wrote in a report on competitiveness last fall.
“Ottawa could help narrow the gap in innovation capability by increasing investment in research and development and/or by more aggressively courting highly skilled foreign workers,” Rangasamy suggested.
But Alexander says it’s also up to Canadian businesses to be more daring.
“We need to promote entrepreneurialism in the country. We need Canadian business leaders to take risks a bit more.”