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opinion

Don Drummond is a Stauffer-Dunning fellow in global public policy at Queen's University, Kingston.

The federal election campaign is giving Canadians a lively debate on the economy and how to improve its performance. Each party has presented useful ideas, but relative to the challenges facing the economy, they represent minor variations to the policy course Canada has followed for several decades.

That course has produced modest economic growth with the benefits going only to the select few. Much is being made of the squeeze on the middle class. Little attention is being paid to the decline in real incomes at the lower end of the income distribution.

Under the status quo, Canada's future economic growth rates will only get weaker as our lacklustre productivity record combines with lower labour force participation rates and hours worked due to population aging. Global economic growth will continue to trend away from our principal trading partners to concentrate in areas in which we have weaker ties. It should by now be clear we cannot ride largely unprocessed natural resources to permanent prosperity and heightened international competition will continue to pressure Canada's manufacturing sector.

In short: Almost everything has changed in Canada's economic context, other than the general approach of public policy. These are the real issues, not whether the Canadian economy is or was in a mild recession, or whether the federal budget should be in slight deficit or balanced.

In a recent paper for the Centre for the Study of Living Standards, my co-authors and I concluded that policy reform must be broader and deeper than the current discourse envisages. Public infrastructure needs to be strengthened but the question also needs to be posed as to why private investment has not been stronger in the face of competitive corporate tax rates and attractive research incentives.

Free-trade agreements are essential for a trading country, but more needs to be done to ensure greater diversification of our trade by country, product and firm. Recent trade agreements tend to be bilateral or regional and that presents complex rules-of-origin, which small and medium-sized companies may find difficult to navigate on their own.

We cannot fully benefit from our highly educated population unless there is a better match with the requirements of business. Income distribution will not be more equal until we improve the integration of highly educated immigrants, elevate education opportunities for indigenous people, foster greater representation of women in disciplines of strong labour demand and create the conditions for a fuller labour market participation of people with disabilities.

Addressing Canada's economic and social challenges calls for two complementary approaches to public policy by federal, provincial and territorial governments. A competitive playing field must be established. Freer trade, lower inflation, a lower public debt burden and lower taxation of capital have gone a long way to this end. That agenda needs to be completed through measures such as removing the remaining interprovincial trade barriers and converting the remaining provincial sales taxes to value-added taxes.

The competitive playing field then needs to be complemented by actions to break specific market failures. This calls for a more activist form of government and that may be met with trepidation. And rightly so. Along with some successful public programs, there are many cases in which government economic interventions have distorted markets, effectively squandering taxpayers' money for no good.

Does that mean any future policy endeavours are doomed to fail, so they should not even be tried? That conclusion perpetuates the economic and social status quo, which should not be acceptable to Canadians and their governments. Meeting Canada's challenges will require unprecedented efficacy and efficiency of public programs. Problems must be better defined, solutions better designed and effects much more carefully monitored. How to do this should be at the heart of the election discourse.

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