Trump: Canada’s productivity champion?
Prime Minister Mark Carney pictured with U.S. President Donald Trump in the White House earlier this month. “There are areas where Canada and the United States can compete — and areas where we are stronger together. We’re focused on building that strength to create new opportunities for businesses, workers, and their families,” Carney wrote on social media. / TWITTER PHOTO
To study politics is to savour paradoxes.
As we approach Budget 2025, Canadian economists will be looking for, at long last, a real plan for a federal government to shore up Canada’s stagnating productivity growth. The paradox is that it took President Donald Trump, whose tariff policies economists widely loathe, to make a long, long-hoped-for moment possible.
Nothing has plagued economists more than the awareness that elections are almost always about the economy, but never about the most important economic issue: productivity.
It is a fundamental principle among economists that rising productivity drives greater competitiveness, which in turn builds national wealth, lifts wages, and enables greater national investment in healthcare, education, infrastructure, and so on. Falling or stagnating productivity growth means the reverse: a nation on the road to the poor house. And that is the road that Canada is travelling.
Productivity: Unseen and unheard
Even so, productivity has never been a vote-driving ballot question in any Canadian election. Warnings about productivity are treated with the same concern among average voters as grazing cattle might regard a passing train: indifference. At worst, lagging productivity is the all-too-familiar justification provided by bosses for laying them off.
Apart from the ivory tower theorists, productivity is invisible and more or less meaningless. Canadians experience declining or stagnant productivity by reference to symptoms: small or no wage gains over time, crumbling public services, needing more than one job to make ends meet, or they cannot afford to buy a home. However, as political leaders know all too well, voters blame the government for these problems, not some insidious, unseen economic force.
It’s not as if politicians don’t recognize the importance of solving Canada’s productivity puzzle. Every federal government over the last 50 years has invested in boosting scientific research, as well as the commercialization of new technology, and in strengthening the skills of workers. These actions may, indeed, lay the foundation for future growth, but the benefits will likely materialize after the next election, when someone else may take credit.
Politicians also despair of finding a vote-winning narrative around productivity. In turn, they can’t bear receiving constant productivity jeremiads from economic think tanks and have yet to furnish a compelling productivity narrative that can be understood by anyone without an advanced degree in economics.
The practiced disdain among economists for elections comes down to the strong implication that voters are too dumb to get it, and politicians lack the courage to make a public case. This disdain is returned by politicians and voters who in turn propose and then approve economic policies—like, say, cutting the GST—in spite of, or perhaps because of, the fact that professional economists will come out against them.
Even as the state of the economy is typically a core election issue, politicians will latch on to any theme other than productivity.
The 1988 election, for example, was fought over the Canada-U.S. Free Trade Agreement. The public debate hinged on the agreement’s economic benefits weighed against the potential loss of Canadian sovereignty. However, underlying the election rhetoric was a conviction among the agreement’s supporters that aligning the Canadian economy with the U.S., in the context of a rapidly globalizing economy, would strengthen Canadian competitiveness through stronger productivity growth.
In 1993, Canada was facing an unprecedented fiscal crisis. However, the election that year was about whether Jean Chrétien was fit to be Prime Minister, a ballot question fervently fought for by the incumbent Progressive Conservatives, but one that they came to regret deeply as they shuffled off into political oblivion. The extraordinary drag that a generation of annual deficits had put on Canada’s productivity performance never came up.
The serial climate change elections contested between former Prime Minister Justin Trudeau and various Conservative leaders boiled down to a debate over whether, on the one side, the Conservatives were climate change deniers, and on the other, the Liberals were crazed environmental radicals bent on destroying the economy. The productivity benefits of investing in clean technology were scarcely mentioned.
2025: The productivity singularity
But the April 2025 election may have been different. On the surface, it was a pitched battle between the Liberals and the Conservatives over whether the economic threat of President Donald Trump’s tariffs or the Liberal record on the cost of living was more important to voters.
More deeply, the Canadian economic nationalism unleashed in voters outraged by Trump’s errant sabre rattling created the space for Prime Minister Mark Carney to introduce a host of new national building projects meant to wean Canadians off our economic dependence on the U.S. and enable us to stand apart from the Americans as a Northern Tiger ready to compete and do business with willing partners anywhere.
As the Prime Minister said on election night, “We will need to do things previously thought impossible at speeds we haven't seen in generations.” None of this bold, ambitious agenda will be achievable without a coherent plan, the required investment — public and private — and the agile regulatory frameworks to transform Canada into a productivity super power.
Budget 2025 comes at a watershed moment in Canada’s history, a time where the long-standing preoccupation of economists with our intractable productivity problems aligns with the political agenda of a government that has been validated by voters.
That it took President Donald Trump to bring about the political and economic singularity must bewilder economists. But no doubt they will take the win.
