You study and frequently write about Canada’s economy and have argued that Canada is a great country, but it could be a much better one. Can you share more on this perspective? What makes Canada great and how could it be better?
I grew up in Canada in a mid-sized city and was raised in modest circumstances. I have since had the rare privilege to see and work in much of the world. While I have relished my adventures everywhere, with each passing year I have become increasingly convinced that Canada has accomplished something unique on this planet.
Canada is an immensely civilized, tolerant, and decent society. We welcome people from all corners of the world and integrate them in a way no other nation can match. We offer socialized health care, excellent education, and a strong social safety net. We have, by traditional measures, built a powerful, diversified economy (ranked 10th largest in the world) that has strength in natural resources, manufacturing, financial services, and technology. Despite an economic orthodoxy that tells us there are trade-offs, we enjoy a very high GDP per capita (ranking 6th among larger countries in PPP terms), even though we have a strong safety net. [Source]
Our universities are world class, with three in the top 40, globally. Four of our cities are in the top 20 in the world for livability. We generally enjoy excellent relations with nations around the world and our people are welcomed everywhere; Canadians who live abroad are quietly making remarkable contributions to many other nations in business, the arts, government, and science. We have accomplished this while maintaining a unique cultural identity that includes our wide range of contributions to music, film, and television; our passion for the environment; our absolute commitment to both universal health care and our strong social safety net; our relationship to ice hockey and other winter sports; and, of course, our iconic Canadian Tire and Tim Horton’s. Our success has not gone unnoticed. A recent example is the Economist’s observation that in a world of increasing fear, xenophobia, and isolation, Canada stands out as the world’s true defender of open, liberal values (See article, “Liberty Moves North,” in The Economist, October 2016). All of this we have achieved with 36 million people, ranking 38th in population size globally. We truly punch above our weight.
How do we currently measure the economic health and vitality of Canada? What does this tell us, what does it leave out, and how can we better measure the country’s economy?
We are all overly concerned with GDP. Presumably, this is because we believe that higher GDP translates into greater well-being for society. While this is generally true, there is lots of evidence that around the mid-1980s, the link between GDP and well-being started to break down in advanced countries. So we need to consider other measures. Obviously, there has been a lot of thinking about various indicators such as health or education, for example, but as of yet, we do not have an integrated way of measuring how we are doing and these indicators have not been widely adopted or understood.
The great advantage of GDP is that, however imperfect, it is a single number. We need to move beyond our GDP obsession, however, if we are going to make people’s lives better.
You have said that you don’t believe GDP per capita is the right metric to measure the success of a country. I know you think about alternative ways of measuring how the economy is serving its people; can you share some different ways of thinking about this?
I live in Nigeria. In a country at its level of development, GDP per capita is a critical measure and it is important that it grows, albeit in a way that benefits everyone, not just the wealthiest. In Canada, we are at a different stage of development and we need something that better reflects the overall well-being of society and helps us to understand whether or not we are moving forward. To give a simple example, if we have more crime and spend more on security and prisons, GDP per capita will go up, but we are clearly not better off.
In the last two decades, there has been a growing interest in and body of research on various ways to measure well-being. Happiness is an interesting one, though not my favourite. In Canada, there is actually an index of well-being put out by The Canadian Index of Wellbeing, at Waterloo, Ontario. I think this is good progress, but I am in favour of something more sophisticated around the concept of “Flourishing.” That is, the purpose of the economy is to maximize individual Flourishing. This is a complex concept, but I like it because it captures what it means to be a human being – not only in terms of wealth and good health, but also with respect to factors such as purpose, novelty, learning, and relationships. Of course, Flourishing for this context needs to be clarified and made more specific, and this is something that no one, including me, has done yet.
The Century Initiative has a goal of 100 million Canadians by the year 2100. What’s your point of view on a larger population for Canada?
Globally, we need to see the population stabilize. We do not have unlimited water, arable land, or other resources currently needed by most societies. At the moment, every rich country uses more resources per capita than the carrying capacity for the planet. I would certainly like to see the global population stabilize at less than 10 billion and perhaps even shrink. However, within this overall limit, Canada is one of the countries that can absorb a larger population.
Canada has massive land resources and, with global warming, these will become more productive. We have shown that we can absorb people from all over the world who embrace our values of tolerance, multiculturalism, and social consensus. And our voice is important in the world, particularly in these perilous times when there are dark forces of divisiveness and hate. So, at 100 million people, we would continue to be a country with a big population, and we could have a voice for these values in world affairs.
Increasing Canada’s population will solve our economic problems. Our population is aging and our natural growth rate is slow. In some places, such as rural Nova Scotia, the population is already shrinking. In a massive country with a shrinking population, our economic vitality will ebb away. So I am in favour of Canada trying to get to 100 million – largely through immigration – while simultaneously working through multilateral channels to get the global population to stabilize.
What role do you think population growth plays in economic growth?
In the 1980s, famous Canadian economist, David Foote, prefaced that half of what happens in the economy is based on demographics, and the best thing was that we could know demographics 50 years in advance! When he said this, it was new thinking, but even today, people forget how critical demographics are to the economy.
In the 1950s and 1960s, North America experienced terrific economic growth. Why? This was essentially because there were lots of young adults forming families and having children. They bought houses, cars, furniture, and clothes. Teachers and doctors were hired; schools and roads were built. This built up the economy. I was an economics graduate student in the early 1980s, and at the time, we really did not seem to understand the role of demographics in the economy. In the political sphere, the same was true: as in the famous quotation about George Bush, economists found themselves on 3rd base thinking they had hit a triple. Today, economists speak with surprise about the ‘new reality of economic growth’ in advanced countries. If we had paid attention to demographics, however, we would have predicted what is happening now and might have helped mitigate its effects. Instead, economists are only now coming to understand the impact and causes of low growth in countries with shrinking working-age populations – and are scrambling for solutions. A good example of this is Japan. Japan’s working age population started shrinking in 1994. So, why is it such a big surprise that the economy has not grown much for 20 years? Even with productivity growth of 1.5% per year, if the working age population is shrinking 0.5% per year, then the economy will grow at only 1%. The working age population growth is crucial.
Of course, as we age, one way to change the equation is to adjust who is working. We had this transformation earlier with women entering the workforce in large numbers, really propelling their economies. There continue to be countries where the lever of full workforce participation is critical – Saudi Arabia and Japan come to mind. For countries like Canada, extending the working age is one crucial lever, but having people work later in life needs to be done in a creative way. Not everyone can or wants to work past 65, though many do. In addition, what one does and the hours one works have changed and will need to continue to change. There is a big challenge for the structure of working life going forward.
Where do you hope Canada will be in the year 2100?
To answer this question, we need to work backwards from the way the world will look in 2100. There are a lot of unknowns – particularly the impact of technology – but assuming we do not have some cataclysmic event, I am hopeful we will be about 10 billion people or fewer. There will be 5 major poles of population, all of which are a long way from Canada – China, India, Southeast Asia, the Middle East, and Sub-Saharan Africa (SSA). To put this in perspective, the population of SSA will be over 2.5 billion by 2050. According to the UN middle projection on the global population (which will reach 11 billion by 2100, above the 10 billion I am hoping for), there will be 26 countries with over 100 million people, only 2 of which are considered today part of the ‘developed world’ – the USA and Japan. Thirteen (13) of these countries are in Africa, and Nigeria will be the world’s 3rd most populous country, with over 750m people. So in the world of 2100, Canada will be small player, even if we reach 100 million people. I am optimistic, however, that Canada can play a significant role throughout the century, using our unique status as a peaceful immigrant country to be a voice for tolerance and stability. Given the potential for conflict arising from population growth, climate change, and economic disruption due to technological change, this voice will be more essential than ever.