Canada's Economy Is Stronger Than It Seems

Fixating on GDP blinds us to our other assets, like good health care and happiness

- Brian Lewis

EVER SINCE MY DAYS as a student of economics, I've been fascinated by how we measure things. How do we know whether Canadians are producing more, earning higher incomes or increasing their living standards? These fundamental questions don't just inform how we assess our economy-they also guide public policy and how the government budgets.

For decades now, most economists have accepted the belief that Canada's living standards have fallen behind those of the U.S. This idea is built on statistics that show Canada's economic productivity-measured by real GDP per capita or hours worked-is growing more slowly than that of our southern neighbour. According to the World Bank, real GDP per capita in the United States increased by 64 per cent between 1990 and 2022; in Canada, that growth was only 43 per cent. The resulting image of Canada is almost self-deprecating: underachieving a nation of polite, dullards, failing to keep pace with the flashy, ever-climbing Americans.

When I hear bank macroeconomists and policy pundits argue that Canada is suffering from a productivity crisis, I can't help but chuckle. How can they make such sweeping conclusions based on a single metric like GDP? Simon Kuznets, the economist who helped develop the measure a century ago, cautioned the U.S. Congress in 1934 that "the welfare of a nation can scarcely be inferred from a measure of national income." And yet this narrative has become so pervasive that, last September, the Liberal government enlisted former Bank of Canada governor-and newly anointed Liberal leadership candidate-Mark Carney to advise Prime Minister Trudeau about near- and longer-term economic growth.