Much debate continues to greet the latest statistics indicating Canada’s productivity — measured as economic output generated per hour of work — has continued to decline, dramatically lagging other G7 countries. What began as a rant by pundits, has now shifted to a steady lament. Instead of joining the choir, wouldn’t our time be better spent looking upstream?
If we want to improve productivity in Canada, we should be investing in our own businesses and essential community infrastructures to support them.
The search for foreign direct investment has long been a Canadian preoccupation. Instead of doubling down on creating conditions to ensure any capital generated in Canada continues to be invested in Canada, we have pursued investments from other places. Too often, money that is made here is quickly whisked off to be invested elsewhere.
Nowhere is this more ironic than following the money of our pension funds, which defend their obligation to their members to pursue highest returns outside of Canada, even as the infrastructure and services upon which the communities in which they live depend — such as affordable housing, access to capital, transit and mental health services — are starved of investment.
We need to make investing in Canadian businesses — and investing in our communities — a top priority again.
In the last century, Canada invested heavily in major transportation, mass transit, housing, energy generation and distribution, health systems, post-secondary institutions and cultural infrastructure — the underpinnings of an economy able to grow and diversify, and a society able to integrate significant numbers of immigrants each year. We built power plants and public libraries, transit systems, hospitals and concert halls. This enabled millions of Canadians to work productively in many places, many sectors, create businesses, provide services and make meaningful lives and vibrant communities.
It’s time our economic policies prioritized buttressing and building vibrant communities so that money stays in Canada and so that we are investing in Canadian ideas, services and industries.
One of our greatest strengths is our small and medium enterprise (SME) sector which employs close to 90 per cent of Canada’s labour force working in the private sector. SMEs absorb newcomers, providing a path to economic inclusion, skills development and social integration. Yet getting investment into smaller enterprises — where most Canadians work to support their ‘productivity’ — can be quite challenging, where the transaction costs, and more modest returns, deter investors.
Canada is a country rich in natural assets and a myriad of environmental, civic and cultural assets. Investing in them with our own resources — private and public investment funds, corporate returns, philanthropy and good old-fashioned taxation — may render a slower growth rate and a smaller rate of return in the short term, but over the longer term, will generate returns for investors.
It would also support the necessary conditions for a resilient economy, better equipped to adapt to rapidly changing conditions. Government policies should incentivize various forms of sticky investment.
Take for example, the impending fate of Chateau Montebello, one of Canada’s most iconic hotel destinations, with the financial collapse of China’s Evergrande conglomerate. This typifies the risks of surrendering our key assets to offshore investors.
Contrast this with Fogo Island Inn, where the beneficial owner is the local community, upon which its continued success entirely depends. Fogo Island Inn was created by Shorefast (a registered charity) as a part of a process to invest in the development of the natural and cultural assets that exist in the place. The Shorefast model reinvests in the assets of the place along with Canadian investors from the private, public and philanthropic sectors.
Further, strategic, modest government investment can strengthen local economies from the ground up. My Main Street is an application-based program to invest in independent businesses and place-making activities along main streets in Canada. It is administered by the Canadian Urban Institute with support from the Federal Economic Development Agency for Southern Ontario and offers streamlined, direct-to-business and community placemaking support to help attract visitors and locals to main streets.
Canada’s economy is distributed across many communities — cities and towns of different sizes and across many regions in the country. Despite differences in scale between urban and rural communities, we must invest our resources in creating the enabling conditions to support businesses, and the people and places that support them.
To develop a country as geographically vast as ours we must become masters of many scales.
Canada is made up of thousands of places, rich with assets that are ripe for investments to strengthen their capacity to self-fuel. This is an opportunity to make investments that will create distributed economic momentum for our country.
Photo courtesy of DepositPhotos
