Claude Lavoie was director-general of economic studies and policy analysis at the Department of Finance, and Canada’s representative to the OECD, from 2008 to 2023. He has received many honours, including the Queen’s Diamond Jubilee Medal.
Canadians’ sentiments are at odds with economic reality. Sure, things could be better, and growth has certainly slowed, but the economic situation is not as bad as many seem to believe.
Our poverty and unemployment rates are at near-record lows and income inequality has not increased and is relatively low compared with peer countries. The median hourly wage is higher than it was pre-COVID, even after controlling for inflation. And our middle class is among the richest in the world, according to the most recent available data.
While some are not faring as well as others, the situation is nothing like we saw in the early 1990s or after the 2008 financial crisis, and yet we don’t seem to feel better than we did back then.
Canadians’ life satisfaction is about the same as it was in 2010, when the unemployment rate was above 8 per cent. Canada’s ranking in the World Happiness Report has fallen from sixth to 13th since then, and the sense of gloom about the future of their personal finances has increased from 20 per cent of respondents in an Angus Reid poll to 30 per cent.
The reason for that might seem surprising, but it is not totally so. Empirical evidence shows that higher income, once you get beyond a threshold level that most Canadian families already meet, does not really improve life satisfaction. This is a phenomenon called the Easterlin paradox.
It seems that Bill Clinton’s successful presidential campaign’s message “It’s the economy, stupid” has really stuck as governments and political parties on both sides of the border continue to concentrate too much on economic issues, often at the expense of other important societal objectives.
Recently we witnessed the Quebec government forcing families out of their houses, despite all the associated mental-health implications, instead of forcing a company to obey its environmental regulations. Rather than ask the Swiss giant Glencore to stop polluting at its local copper smelter, the provincial government chose to uproot 200 families.
And how many times have we seen governments fail to protect workers – passing back-to-work legislation, for example – out of economic concerns?
When we look at the factors that make for a good quality of life – these are available on Statistics Canada’s quality-of-life hub – economic determinants of well-being are not at the top of the list. (The exception being our poor productivity performance, a perennial issue.)
The more likely culprits of the population’s gloomy mood include the decline in mental health and personal safety, increasing difficulty in accessing health care, the degradation of the environment, and, especially, the trust and confidence in our institutions.
Canadians’ mental health has been declining for decades. The country is among the worst emitters of greenhouse gases per capita. The quality of the water in our rivers is deteriorating. The severity of crimes has increased. Access to civil justice is low by international standards, and confidence in the fairness of our justice system is declining. Trust in government has fallen, and only 30 per cent of Canadians have strong confidence in the federal Parliament.
The inability of governments to deliver decent-quality public goods and services has likely contributed to this decreasing trust in institutions. This is scary because while the economy does not appear to be the biggest source of most people’s unhappiness, it can very well become that source: Good and trustworthy institutions largely explain why some societies are rich, and some are poor.
Moreover, people who lose trust in their governance start fearing that the future will be unkind to them, particularly in the context of rapid technological, environmental and demographic changes.
These people are often willing to elect a “strongman” who takes away some of their freedom in exchange for a sense of protection and calming their anxiety by denying the inevitability of such changes.Examples of countries that have moved from liberal and democratic institutions toward authoritarianism with the population’s approval have abounded recently.
If you are unhappy, this is probably why: Trusting institutions is difficult when you are not sure you can get your passport on time; when immigrants are stranded because of long delays in processing their files; when you have difficulty accessing health care if you are sick; when getting basic information from your government is cumbersome; when elected representatives are self-interested (think the Greenbelt saga), politically motivated and secretive; and when some members of the federal Parliament cannot even do a simple check on historical facts.
Politicians may want to change their old mindsets and focus on building Canadians’ trust in their institutions by improving the delivery and quality of public goods and services. Stop trying to reverse or stall essential environmental policies such as carbon pricing. Stop politicizing the public service. And stop giving taxpayer money to large corporations for the supposed sake of the economy.
After all, what may win the next election may not be the economy, stupid.
Editor’s note: Due to an editing error, a previous version of this article incorrectly referred to Glencore as an Australian company. Its head office is in Switzerland. This version has been updated.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
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