Skip to main content
federal election 2015

For an election that's supposed to be all about the fragile economy, the party leaders are offering few fresh ideas to help shore it up.

They are largely ignoring what will be the struggle of a generation – squeezing enough growth out of the economy to preserve Canadians' envied standard of living.

Chalk up Thursday evening's leaders debate on the economy, sponsored by The Globe and Mail, as a lost opportunity.

Pledging to balance the massive federal budget, as Conservative Leader Stephen Harper and the NDP's Tom Mulcair did, falls short of a vision for the Canadian economy.

Liberal Leader Justin Trudeau's contrasting promise to run up to three years of relatively modest deficits to ramp up spending on roads and urban transit is a nod to the slow-growth conundrum.

But there is so much more that governments can do. All three talk of tinkering with tax rates.

The oil price collapse is a prelude to much more profound economic challenges ahead.

Canada, and much of the developed world, is staring at what could be a prolonged slow-growth era, a result, in part, to an aging and slower-growing population.

Gross domestic product is expected to grow just 1.6 per cent a year over the next quarter century, a sharp deceleration from the 2-per-cent annual growth experienced between 2000 and 2014, according to a report released this week by the Centre for the Study of Living Standards. Several other recent studies have forecast similar weak growth.

The economic downshift is already exposing a host of chronic problems – flaws that have been masked by the long commodities supercycle. These include anemic productivity growth, diminished factory capacity, deteriorating export competitiveness, and a shaky record on innovation and business R&D.

These are enormous challenges that will require big thinking from governments, and almost certainly large cheques. A cheaper Canadian dollar and a U.S. economic renaissance are insufficient.

The parties talk about improving public services, such as health care, daycare and urban transit. But, unless they solve the growth dilemma, it's not clear where the money will come from to pay for these promises, let alone sustain what we already have.

To be fair, this isn't just a challenge for the federal government. It's also a problem for provinces and cities, which are facing a similar mismatch between growing needs and inadequate tax revenues.

The only palatable option is to expand the economy out of this squeeze by finding new ways to permanently raise GDP.

"Stronger economic growth will allow governments to meet the dual challenges of giving our children an economy with greater opportunities than those which we have enjoyed, while also allowing governments to continue to provide the services which Canadians expect," argued the authors of the Centre for the Study of Living Standards report, including former Toronto-Dominion Bank chief economist Don Drummond.

Easier said than done, of course. The report spans roughly 300 pages and offers up nearly 100 recommendations. Mr. Drummond and co-authors Evan Capeluck and Matthew Calver urge a mix of free-market solutions and government activism. Their solutions range from pricing carbon, making consumers bear a greater share of the tax burden to boost public funding of R&D and transit, and attracting more skilled immigrants – something they dub "inclusive and sustainable economic growth."

"The failure of Canada's market-oriented reforms to generate a golden age of economic prosperity suggests that simply creating a level playing field for competition and then passively hoping that growth will happen may not be the best approach," the report concluded. "Governments can do more to support actors to make optimal decisions in the competitive marketplace."

It's not a question of meddling in the economy or picking winners. But governments have a role to play. A good start would be to generate much better data on the labour market. Governments also need to distinguish between nice baubles and productive infrastructure investments. They can also use their purchasing power to spur corporate innovation (as former top bureaucrat and banker Kevin Lynch suggested in a recent Globe op-ed).

These are complex issues, which aren't easily captured in soundbites and election slogans.

But a good start would be to admit there is a problem, and then commit the next government to charting a bold new course for Canada's economy.

Interact with The Globe