Montréal, November 16, 2022 – A study released today by the Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) sheds new light on the nature of the productivity problem slowing the growth of the Canadian economy. According to the HEC Montréal researchers, there is simply not enough competition in Canada to create the incentives necessary to stimulate companies’ competitiveness.
“Given the geographic dispersion and segmentation of its economy, Canadian firms have historically developed in small domestic markets, limited to provincial scale and protected by administrations that deemed foreign competition a threat to a small economy like ours,” explains CPP Director Robert Gagné. “Since businesses here were not exposed to strong competitive forces, they haven’t had to develop the proper reflexes in terms of investment and innovation in order to boost their productivity.”
Ill equipped to handle competition, Canadian businesses were rapidly overwhelmed when markets became more integrated in the early 2000s. “Since then Canada’s economy has been gradually declining,” notes Gagné. “Whereas it had a lead of nearly $2,000 per capita in the average standard of living in the Western economies in 1981, by 2021 Canada had fallen behind this same average by approximately $7,000, after inflation and differences in currency purchasing power are taken into account. And judging by the projections in the latest federal budget, it may end up trailing the group by 2060 if nothing is done to correct the path our economy is taking.”
