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It took Canada the better part of the past decade to bring a recession-trampled economy back up to full speed. But was that entire recovery an illusion?

That may be overstating it. But a recent report from the International Institute for Sustainable Development (IISD) argues that the growth in Canada’s economy, as measured by that old standby yardstick of gross domestic product, “has been unsustainable for much of the period since 2008.” In fact, it argues that we’ve been living off economic borrowed time for decades.

The IISD paper comes to this conclusion by looking at the growth of Canada’s “comprehensive wealth” – the broad range of underlying assets on which the economy is built. Comprehensive wealth can be broken down into five classes of assets:

  • Produced capital (buildings, machinery, infrastructure, etc.);
  • Natural capital (land and commodity resources);
  • Human capital (the body of collective skills and knowledge in the labour force);
  • Financial capital (stocks, bonds and other financial assets);
  • Social capital (civic engagement and strength of public institutions).

“Comprehensive wealth is the foundation for producing all goods and services – both market and non-market – needed to support well-being,” the report says. “For well-being to be sustainable, comprehensive wealth must be stable or growing over time on a per capita basis. If it is not, the country is eroding its productive base, living off its inheritance rather than building for the future.”

Looking at data from 1980 to 2015, the IISD found that Canada’s per capita real GDP (that is after adjusting for inflation) grew by an annual average of 1.31 per cent. But per capita comprehensive wealth over the same period grew by an average of just 0.23 per cent annually.

What’s more, the report argues that the post-2008 recovery was built on particularly shaky ground in terms of the underlying wealth. It was heavily concentrated in investment in housing and oil and gas infrastructure – leaving the economy at the mercy of price downturns that can gut the value of the underlying wealth.

The IISD is hardly unique in raising issues about the value of GDP to gauge economic prosperity in the postrecession era. In many economies, the recovery has been accompanied by a widening income inequality that means that the benefits of growth have been concentrated among a relative few. Years of ultralow interest rates helped deliver GDP expansion financed by a growing mountain of consumer debt, and aided by an unsustainable surge in house values.

But unlike many other critics of GDP, who have argued in favour of alternative measures of prosperity that focus on tricky-to-measure concepts of social well-being, comprehensive wealth is largely grounded in the kinds of things economists can sink their teeth into: The value of assets across an entire economy.

“GDP measures income today. But what matters in the long run is wealth, the foundation of income in the future,” the report argues.

One of Canada’s huge advantages in terms of comprehensive wealth is, paradoxically, also its biggest disadvantage in terms of growing that wealth: our natural resources. The report notes that Canada’s natural capital is nearly four times that of the second-place Group of Seven country (the United States). Problem is, much of our natural capital is finite; every time we drill it or mine it, we shrink the total. The study said Canada’s natural capital declined by 17 per cent from 1980 to 2015, “largely as a result of depletion of many of Canada’s natural resources.”

But the bigger factor in the past few years has been the downturn of commodity markets, especially oil, since 2014. The report notes that the value of Canada’s oil and gas assets fell 83 per cent in 2015 alone due to the collapse in oil prices.

Indeed, the rich Canadian oil sands might be the finest example of the economic fallout of a downturn in a component of comprehensive wealth. As the value of oil sands assets has eroded, the payoff from tapping into many of them has evaporated – many of those assets may never leave the ground. And given that oil sands also require tremendous investment in produced capital (by 2015, one-quarter of the country’s business-sector produced capital was in oil and gas extraction assets), the decline in the value of the oil sands assets also implies a drop in produced-capital growth.

The IISD isn’t just telling us all this to cast a cloud over our view of Canada’s economic health. It wants to open government eyes to another perspective from which to view economic policy, one with a longer range than quarter-to-quarter or even year-to-year GDP.

As a starting point, it urges the government to provide funding for Statistics Canada to regularly compile and publish comprehensive wealth data – noting that the statistical agency already measures many components of comprehensive wealth anyway.

“Today, the decision-making scales are tipped in favour of the short term,” the report says. “We believe it is time they be balanced.”

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