A Post-Pandemic Growth Strategy For Canada

Sean Speer, Drew Fagan and Luka Glozic examine current economic planning efforts by Canadian policymakers, how they compare to other jurisdictions, and how best to plan for the post pandemic future.

Introduction

The recent spike in COVID-19 cases has caused Canadian policymakers to focus on the pandemic at the possible expense of post-pandemic planning. Managing the spread of the virus understandably remains the overwhelming priority.

But, as Munk School fellow Robert Asselin recently wrote, we cannot afford to set aside post-pandemic policy development indefinitely.^[1] Other countries such as the United States, United Kingdom, Germany, and Australia have developed bold policy agendas to catalyse future growth when the pandemic eventually subsides. Canadian policymakers must match them if we are to compete for investment, innovation, and jobs now and into the future. As Asselin puts it: “Where is Canada’s economic vision for the future?”

Such a vision should put the goal of sustaining higher rates of economic growth near its centre. It is not that economic growth is an end in itself. But, as we outlined in a previous paper for Ontario 360, it is a crucial precondition to addressing many of the long-term challenges facing the country including with respect to public finances (such as funding for education, health care, and social services), employment, wages, and ultimately living standards.^[2]

Canada’s rate of economic growth has slowed in recent decades. Consider, for instance, that the average growth rate per decade has generally fallen from nearly 6 percent in the 1960s to just over 2 percent since 2000.^[3] We are not alone in this regard. Most advanced economies have experienced sluggish growth over the past two decades or so. The U.S. economy, for instance, has similarly averaged about 2 percent annual growth since the beginning of this century.^[4]

The causes of this secular slowdown in advanced economies are multifaceted. A combination of aging demographics, slowed innovation and technological adoption, overhang of the global financial crisis, and even measurement issues are partly responsible. The consequences of a sustained period of slow growth are likely to be significant. Evidence shows that not only is slow growth associated with less investment, innovation, and employment, it can contribute to political polarization^[5] and zero-sum thinking.^[6] Economic stagnation can ultimately lead to an unhealthy and widespread perception that we have reached an “end of progress.”