A More Productive Canada

Nothing has more impact on our quality of life than our national productivity. Yet political leaders don’t talk about it.

For thirty years now, Canada has been in a state of relative decline. That is why we need to create a national succession strategy to successfully move the country into the post-boomer era.

The seminal economic issue of our age is our national productivity. Nothing has a greater impact on our standard of living and quality of life. Yet political leaders don’t talk about it because they either don’t understand it or fear that people equate productivity with job cuts.

The Conference Board, the Martin Prosperity Institute, the International Monetary Fund, and many others have correctly called Canada a productivity laggard. In the past fifteen years, no federal government – Liberal or Conservative – has addressed this question in a meaningful way.

It is time we do.

Innovation must be at the heart of our economic strategy. Our weak record on productivity has cost us good jobs, and is threatening our quality of life. Education, skills development, and innovation are the drivers of improved productivity and the keys to our economic future.

Our tax system must provide greater incentives for investment, particularly in research and development and the adoption of new technology. We desperately need a "regulatory stimulus" to streamline and eliminate needless jurisdictional overlap, and to tear down barriers to trade between provinces. Infrastructure is critical for an innovative and high-productivity economy. So are vibrant, healthy cities, where much of a society's knowledge and entrepreneurship is concentrated.

The Federation of Canadian Municipalities estimates that $130 billion is needed to modernize our aging infrastructure. This includes roads, bridges, sewage and drainage systems, and water treatment. Public transit and major ports must also be expanded and modernized, including high-speed rail and major improvements to the Trans-Canada Highway. Clean and renewable energy is an integral part of a future that must be created.

The private sector can and should be a major partner in this effort to help finance projects and reduce the risk to taxpayers. However, federal leadership is essential in building a common cause to mobilize Canadians.

Our health care system is in need of urgent attention. While Canadians are proud of our universal public system, it is far from perfect and we face the additional challenge of an aging population. Health care costs are rapidly increasing, putting more and more pressure on provincial budgets. The Canada Health Act requires a serious review so that we strengthen its core foundations for the 21st century. Our ability to provide timely, universal, and world-class care to Canadians wherever they may live has been eroding. We cannot allow this to continue.

There are many ways we can deal with this, including greater experimentation, investing more in identifying the most effective health care solutions, and doing much more to invest in preventative care as we have already done by targeting smoking. A national home care program would humanize the system by keeping families together and improving the quality of life for patients who can and should be treated at home instead of languishing in hospitals. Pretending that the Canada Health Act is just fine and the state of the system does not require modernization is a dangerous and irresponsible illusion. Continuing to perpetuate this fallacy is an unacceptable abdication of responsibility.

Here’s another massive productivity bottleneck: The Indian Act. It is an arcane and antiquated law and a parochial compact with First Nations that manifestly requires significant reform. Aboriginal Canadians living on reserves are wards of the state and destined for a life of abject poverty and squalor in the midst of addiction and disease.

One way to reduce economic dependency is to introduce measures to dramatically increase funding for K-12 and post-secondary education. Another would be to implement measures to introduce property rights on reserves so that First Nations have the opportunity to build financial freedom. Aboriginals are by far Canada’s fasting growing population. Here is a magnificent opportunity to educate and train huge numbers of young people who can and should be productive members of the economy of the future.

There’s much to do and little time to waste.

We should intelligently use our hard-won fiscal capacity and leverage Canada's strong balance sheet to make massive strategic long-term investments in health care, pensions, education and training, innovation, environmental protection and the green economy, and infrastructure.

How do we pay for such an aggressive national investment agenda? Maintaining a strong financial position is fundamental to doing everything else, so our approach must be balanced. On the one hand, prudence dictates that we return Canada’s debt to a downward trajectory. On the other, we must make major investments to improve the quality of life of Canadians over the long term. By its very definition, smart investments will result in substantial economic returns.

However, that doesn’t preclude the need for sensible choices.

Programs we don’t need or don’t work should be eliminated. Crown Corporations that serve no useful public policy purpose and are a drag on the taxpayer should be sold. Overlap and duplication of regulations should come to an end. Silos between provinces on trade and mobility rights should come down. Public-private partnerships should be substantially increased, particularly on critical infrastructure projects.

If we agree that massive investments are needed to strengthen our social and economic union, we have no choice but to look at new ways to raise revenues. Repositioning government operations for this new era will take leadership and shrewd management. But that won’t be enough. We will have to take a very hard look at our fiscal policy and that means, yes, taxes. What makes the most sense – by a wide and deep consensus – is restoring the GST to 7 per cent. Doing so would result in $12 billion to $15 billion in additional revenue annually. A carbon tax is another. This would not only provide significant new revenue, but would encourage more people to shift to energy efficient vehicles and transition to public transportation. Personal and corporate taxes, meanwhile, should be kept as low as possible.

Significant investments in our future prosperity should be combined with modest increases to the taxation of consumption, a much smarter management of government, the sale of assets we don’t need, and cuts to wasteful spending. Predicating all of this is a basic proposition: Politicians must be straight with Canadians.

We need to make choices about the kind of country and society we want for the future.

For 30 years we have underinvested in ourselves. To be a prosperous and caring society, we must reverse that. It is the only way to create good jobs, tool up our skills, sharpen our competitiveness, enhance our quality of life, and breathe new life into our democracy.

This is the second of a three-part series on the future of Canadian politics by Dan Veniez. Read part one here