Thank you, Mr. Chair.
When I was here before this committee last fall, I warned that Canada stood at a crossroads. That is as true now as it was then. If anything, there is greater urgency to fix the problems that ail us. GDP growth per capita, the basic measure of the well-being of the average Canadian, is stagnating. GDP per person is basically where it was a decade ago. In other words, we've had a lost decade here in Canada.
In 1960 our average income per person was the same as that of the U.S. In Canada we now have less than three-quarters the income per person that they have south of the border. In terms of unemployment in Canada, when I wrote these notes I said it was just below 6%, but now we're actually at 6.1% and it could go to 7% or higher. In the U.S., it's below 4%. U.S. growth and productivity continue to be strong, but ours in Canada seem to have flatlined.
What's driving this increasing divergence between the U.S. and Canada and making us significantly poorer than our friends south of the border? Investment is a key driver of growth in income productivity. In the late 1990s gross fixed capital formation—fancy words for investment—as a share of GDP was about 7%; today it's about 3%. In 2013 gross fixed capital formation per worker in Canada was about 90% of that in the U.S.; it's now down to two-thirds of what it is in the U.S.
Why is this happening? Quite simply, increased government spending is crowding out private investment. Government now accounts for about one-quarter of Canada's GDP. It's staggering. Just think about that: One-quarter of our economy is socialized, and our total business investment is now only 8%. It's no wonder the latest numbers show that labour productivity in Canada shrank by more than half a percentage point in the last quarter while in the U.S. it grew by approximately 2.5%.
We are in serious trouble, but don't take my word for it. Recently the Bank of Canada's senior deputy governor, Carolyn Rogers, went so far as to say that low productivity growth in Canada is an emergency and “it's time to break the glass.”
Of course, the Bank of Canada has also done its share to add to our current woes. As I testified previously before this committee, the pandemic saw explosive growth in the money supply as the central bank monetized fiscal deficits financed by sovereign debt or, in other words, quantitative easing. That is what gave us the inflation crisis and the now-cripplingly high interest rates that are making life impossibly difficult for many Canadians.
What's to be done? As I testified last fall, we need to go back to basics. The three pillars of economic policy are fiscal policy, monetary policy and regulation, and they are all badly in need of repair. We've had a fiscal binge in Canada. Monetary policy, likewise, has been on a bender. The economy is over-regulated, thus stifling innovation, new business creation and private sector investment, and creating high barriers for new entrants. As a consequence, our economy is highly concentrated with a handful of dominant, politically powerful and entrenched incumbent firms in all major sectors—everything from cellphone services to groceries to legacy media to banking to airlines, you name it.
With such heavy concentration and lack of competition, it's no wonder we pay higher prices and get poorer service than our friends in the U.S. do for just about everything.
To finish, it's time to cure ourselves of the addiction to fiscal and monetary excess and to take a chainsaw, to paraphrase the new President of Argentina, to burdensome regulations.
It is worth recalling that at the beginning of the 20th century Argentina had about the same per capita income as the U.S. and Canada did, but after 120 years of economic mismanagement, their income is now only one-third that of the U.S. As I said, ours is now actually less than three-quarters.
Unless we mend our ways, we risk going the way of Argentina.
Thank you, Mr. Chair.