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Nathan Denette/The Canadian Press

Claude Lavoie was director-general of economic studies and policy analysis at the Department of Finance from 2008 to 2023. He has represented Canada at OECD meetings and 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.

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