Craig Wright is the chief economist at the Royal Bank of Canada
You cannot stand out when you are in the middle of the pack. But that’s where Canada finds itself as we enter the 2020s and perhaps the most competitive, and disruptive, economic race we’ve seen.
According to the 2019 Wealth Opportunity Index, which was produced by the Economist Intelligence Unit for RBC Wealth Management, Canada stands in seventh place among 15 high- and middle-income countries vying for global capital. The index measures economic fundamentals, market dynamics, innovation and risk, and should matter to the prosperity of every Canadian as it shows what we’re up against in the competition for capital that’s needed to build infrastructure, launch and grow businesses and finance our indebted public sector.
First, some good news. In a world where geopolitical tensions undermine the confidence of global investors, Canada is viewed as a safe harbour – ranking near the top of the index’s risk category. That’s in large part owing to our stable macroeconomic, financial and political climate. We must continue to play to this strength as we compete for foreign investment.
Canada also fared well in the market dynamics category, which examined a country’s attractiveness and activities that are contributors to wealth generation. Yet much of our success stemmed from our robust real estate markets – a precarious advantage given the cyclical nature of property values.
These strengths were offset by some troubling signs. Our macroeconomic and demographic drivers – including real gross domestic product (GDP) growth – ranked us in the bottom half in the economic fundamental categories.
Moreover, Canada’s ability to generate new businesses, products and services, as well as produce research and development was also a clear vulnerability. Our predisposition to generate wealth through innovation lags behind patent-producing economies found in Japan, Singapore, the United States and Hong Kong. Other countries, notably China, benefited from strong productivity growth.
None of these results should come as a surprise, but they do point to the need to address some of the burdens that weigh us down in the race for international investment. We can improve our standing by:
- Reducing interprovincial trade barriers. By doing so, the International Monetary Fund estimates a lift of 4 per cent in real GDP per capita.
- Better leverage our well-educated labour force. We have one of the world’s best education system, which attracts hundreds of thousands of new Canadians, and yet we don’t do enough with it to drive economic and social innovation.
- Explore new trade agreements in South Asia, the Middle East and Latin America, while also helping business and entrepreneurs take advantage of the deals we’ve signed with Europe, Asia-Pacific countries and most recently, our North American neighbours.
- Encourage business and investors to ramp up research and development (R&D) in emerging sectors such as renewable energy and clean technologies for traditional industries.
We also must seize new challenges that will impact our ability to create wealth in the coming decades. For instance, millions of Canadians will need a set of skills for multiple roles, rather than a single career. But educators, employers and policy makers have yet to adjust fully for this skills economy. This also includes helping those at risk of losing their jobs through automation.
A recent RBC report suggests there are about one million Canadian workers in this situation who possess many of the vital skills required for the health-care sector. Helping them make the transition could be an important remedy for a sector that is expected to exceed the overall economy in job creation in the coming years.
Getting this right would represent an important step forward in creating the kind of economy we need to generate greater opportunity and wealth. We entered the 2010s with a national commitment to Own the Podium at the Vancouver Winter Olympics and it worked. The same determination can guide us into the 2020s, to own the podium of international investment and, in turn, stand out from the pack.