Canadian growth is key to proliferate democracy and counter populism.

Canadian-born, U.S.-based think-tank scholar (and past Hub Dialogues guest) Samuel Hammond recently tweeted: It only takes two decades of stagnant GDP growth to go from the economic frontier to a middle-income country. The ‘middle income trap’ is a continuous threat. Although his main observation was about development economics, Canadian policymakers shouldn’t ignore the underlying point. We’re in the midst of a lost economic decade. Our politics should be focused on avoiding a second. Last month’s release of GDP numbers for the fourth quarter of 2023 showed Canada’s real GDP per capita (a measure commonly used to as a proxy for living standards) declined once again. It’s now effectively at the same level as it was in the fourth quarter of 2014. There’s reason to believe that this period of stagnation and even declining economic conditions will persist. Unlike most of our peers, Canada isn’t expected to recover its pandemic losses until 2027. Thereafter the OECD projects that among its nearly 40 members, Canada will experience the slowest real GDP per capita growth out to 2060. Globe and Mail columnist Andrew Coyne has rightly described these trends as a “growth crisis.” The risk isn’t necessarily that Canada slides down the development ladder—though our living standards are declining relative to our peers. The real threat is both less far-reaching and more insidious. Slow growth and stagnant living standards represent serious political economy challenges. They’re the long-run conditions for a zero-sum politics that can lead to a negative spiral of polarization, radicalism, and short-termism. The consequences for individuals and the economy as a whole could be significant. The Liberal Party’s recent online advertisement—“the economy is not numbers. The economy is people.”—was mocked a bit for its banality. But even if inadvertent, there’s an inherent insight there. Economic growth isn’t merely a statistical expression. It’s the material foundation of a peaceful, stable and ultimately forward-looking society. Simply put: Canada needs a dedicated policy agenda to restore economic growth and rescue us from a second lost decade. We’ll consider the possible components of a such pro-growth agenda in subsequent commentary for The Hub. But before we can judge the right mix of policies, we need to identify the causes and sources of our stagnation. We need to understand how we got lost in the first place. At the heart of Canada’s economic malaise is low productivity growth. Productivity is a fundamental driver of growth in incomes and living standards. The interrelationship between productivity and living standards is axiomatic: the more an economy can produce with less, the better off that society will be materially.