Mark Wiseman is chair of the Alberta Investment Management Corporation.
The economic crisis wrought by COVID-19 has been devastating, and the effects will linger long after a vaccine. In the early days of the pandemic our government quite rightly threw everything, including the kitchen sink, at the problem, to protect Canadians physically and economically. The government and the Bank of Canada worked quickly and deployed every fiscal and monetary tool available.
Now, a little more than six months into the crisis, we have racked up hundreds of billions of dollars of debt and monetary policy is quickly reaching its limits. Paying this debt back, especially with the medium-term threat of inflation, will be crippling for a generation of Canadians. To avoid this eventuality, we must embark today on a long-term growth and recovery plan.
There is no doubt that government must continue to spend aggressively. This path is not one that we chose; the pandemic has thrust it upon us. But now that we are here, it is crucial that dollars are spent efficiently and in ways that will stimulate long-term growth. A sustainable economic recovery needs to see Canada’s long-term GDP growth rate rise to approximately 3 per cent (from a prepandemic 2 per cent) to make certain that we can pay off the billions in necessary expenditures.
To begin, Ottawa should ensure spending on near-term relief programs are highly effective and efficient. Every dollar the government spends needs to be repaid, so it should be extra vigilant with every penny spent. Ottawa needs to quickly revisit existing programs to eliminate unintended consequences and disincentives – ensuring that Canadians get safely back to work as soon as possible.
In regards to the longer term, the private sector will lead the economic recovery. The government’s growth plan ought to be one where it invests aggressively in both physical and human capital to catalyze the private sector and create jobs. Government, labour and business must work together to achieve Canada’s economic growth goals.
Ottawa’s investment in physical and human capital should therefore focus on six priorities:
1. The first is long-term infrastructure that catalyzes economic growth, such as investments in transit, transport, pipelines, ports and communications infrastructure. These are projects that will create jobs today and pay dividends for decades to come.
2. Getting our natural resources, including energy, to market efficiently and safely is imperative. We must invest today to get our products to where the demand is globally. Time is of the essence and our natural resources sectors are imperilled. Wherever possible, Ottawa needs to partner with Indigenous communities to achieve this.
3. We must build resiliency into vital components of our supply chain – COVID-19 taught us the importance of this. We cannot allow ourselves to be at risk again. Both government and the private sector must invest more in our supply chains, especially in critical areas such as agriculture and medical needs.
4. The government should support start-ups and innovative small- and medium-sized enterprises through tax incentives, specifically encouraging equity investment and ownership in a small number of key areas where we have demonstrated capabilities, including information technology and agribusiness
5. We need more people – a lot more. We need skilled and unskilled labour from all over the world. The government ought to double down on our immigration advantage, especially for getting talent that traditionally has gone to the United States. In the near term, we must increase our immigration target to 500,000 a year and provide guaranteed permanent residency to any foreigner who completes a postsecondary degree or diploma in Canada. Almost all our economic growth since the Second World War is attributable to population growth. Given current birth rates, accelerated growth requires accelerated immigration.
6. As it has done with health care transfers, Ottawa should work aggressively with provincial governments to create a national child-care/early childhood education program that will be in place within 24 months. This program is conceived as an economic initiative, not a social program. It is required in order to a) achieve higher work force participation by making it easier for caregivers, most often women, to work, b) make it easier for Canadians to have children if they choose to do so, and c) focus on the next generation, since it has been proven that early learning is one of the most important components of human success.
Finally, all the above growth initiatives can and should be done through a green lens, even though a green recovery in and of itself is not a recovery plan. Achieving this growth objective will not be easy. But the government can develop a clear and cogent plan and work with partners in business and labour to execute.
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