Don't use the Fraser institute. They are total hacks.
I remember one time there was a startling statistic. "40,000 Canadians had fled Canada to get better healthcare" The purpose was clear. They were trying discredit Canada's health system in the eyes of Americans.
This was in the Blaze, essentially an American right wing site.
I tracked the source and it quoted something by the Fraser institute. I looked at that and the Fraser institute said that this was based on their annual survey of Canadian doctors.
Digging into that survey, I found the question. It was "What percentage of your patients have received non emergency care outside of Canada last year?"" The answers from their survey was "about 1%".
Now this didn't ask why they received the care. Perhaps they got food poisoning on an Italian vacation. But that didn't stop the Fraser institute, they had a mission and that mission is making Americans believe that Canadian healthcare is awful. So the Fraser institute multiplied out that 1% by all Canadian patients and wrote a report where 40,000 Canadians are "fleeing" the dire state of Canada's health care.
It was total hackery.
The bit quoted in this piece where the the Fraser institute blames leftism without saying how exactly is par for the course.
The 2016 report says 1% of Canadians or 63,459 patients received non emergency medical care outside of Canada. You are the one misrepresenting the report. And getting food poisoning treated while in Italy would be considered emergency care. I don’t know who are total hacks, but their report is more detailed, and you get more facts wrong complaining about it.
Thanks for the link. It shows the hackery right there. (For the record, I was looking at the 2015 report when I noticed this)
This quote leads the report.
" In 2016, an estimated 63,459 Canadians received non-emergency medical treatment outside Canada."
This is probably true.
The hackery comes in the next bullet.
"Physicians in British Columbia reported the highest proportion of patients (in a province) receiving treatment abroad (2.4%). The largest number of patients estimated to have LEFT THE COUNTRY FOR treatment was from Ontario (26,513)."
The Fraser institute assumes that anyone who is receiving non emergency treatment abroad was travelling specifically to get that treatment. That's their own explanation. The doctors didn't say that. The patients didn't say that.
The question on the survey was "Approximately what percentage of your patients received non-emergency medical treatment in the past 12 months outside Canada?" (Page 2)
There is no "why did they leave Canada?" "Were they seeking medical care abroad?".
A Canadian student studying in Germany who goes to the doctor for a sore throat would fall under the question.
The Fraser institute assumes that all Canadians who received health care abroad were travelling specifically to get healthcare.
But there is no evidence. The Fraser institute only knows that some Canadians received non emergency healthcare outside of Canada. They purposely make up their own explanations, all of which are "the Canadian health system sucks".
Read the report again. Find the part where they have any evidence of why the 63,000 people in the report are outside of Canada.
Also, in 2019 an estimated 780k Americans went on trips abroad specifically for healthcare. If anything, 1% of Canadians receiving non emergency healthcare abroad for any reason, is a good looking statistic for Canadian healthcare, at least compared to the US.
Be aware there is a burgeoning private medical services industry in Canada, which usually involves patients travelling to another providence. Quebec has all sorts of private medical clinics offering pay-for-service orthopaedic procedures to Canadians; hip and knee replacements and minimal invasive spine procedures especially. The benefit is billing in Canadian dollars and reduction of financial risk if something goes wrong. A Canadian getting a knee replacement in the US is exposed to limitless expense if something - such as a stroke during anesthesia - goes wrong.
For what it's worth, I think Canada is suffering from a variation of the issues other medium-sized developed countries are having. No developed country with a comparable population to Canada is doing amazingly economically right now. I think this is because once you get to this tens of millions size, you start to become so big that you find it harder to occupy small economic niches (like Ireland) and to find political consensus (like Singapore).
But you also lack the large internal markets and investment pools of the biggest countries, like China or the US. One manifestation of Canada's economic problems is the presence of oligopolies: airline and supermarket duopolies, a similar lack of competition in banking and telecoms, and so on. This is obviously related to the internal market issue: how many more airlines and banks could you support in a country with just over 40m people? The EU managed to partially overcome this problem by creating a large single market, but it is still badly integrated for capital markets and services.
These issues are then compounded in Canada by a number of factors, including:
- Its complex and byzantine federal government structure
- The country's sheer size and lack of good infrastructure links across all of it
- A larger, richer neighbour that Canada has a close relationship with but is also frightened of
- Over-dependence on commodities exports
- A (mostly) Anglo aversion to building housing and infrastructure, like the US, UK, and Australia.
The byzantine federal structure is something people really have difficulty getting their heads around. Prime example in the post by Noah, he naturally assumed the growth in the number of foreign students was a Trudeau policy, because you'd naturally think that falls under immigration which you'd assume is entirely Federal.
But it isn't, it was a Provincial level policy decision, which you can see by how it was so concentrated to Ontario in particular. Firstly that immigration isn't entirely a Federal constitutionally (its an unusual joint area), secondly that student immigration policy is treated as an Education policy, not a Federal immigration policy. The Provinces write the policy about how many foreign students they want and since this was last hashed out in the 80s the Feds were supposed to be confined to the role of processing the paperwork. In real terms, this makes perfect sense, the Federal government has no higher education bureaucracy, it has no idea what's appropriate and no way to find out, and the other concern with student immigrants, local services and housing are likewise Provincial level concerns. That the Federal government responded to public outcry by proposing a Provincial level student visa cap caused one academic to observe that the Minister of Immigration had just de facto became the first Federal minister of higher education.
Not to blame Noah for not understanding any of this. He's doing a quick take on at best third to fifth hand information, most of which is put out their by people pushing their own political agendas, and most Canadian citizens are fairly in the dark about how this all works because its a complex web of compromises and arrangements that don't accord with how you'd think it would work from first principles. If I had a comment to the host, its merely that this is an expected problem with doing quick look analysis of countries you don't have much familiarity with based on a quick dive into some stats.
Credit for classically Canadian passive-aggression, but, no, Noah is correct that the Canadian federal government is to blame for immigration issues. The BNAA of 1867, which is a part of Canada’s constitution, made “Naturalization and Aliens” exclusively federal jurisdiction. Section 91.25. So, no matter what the provinces were doing, Ottawa is ultimately to blame for dysfunctional immigration.
To be sure, the federal government allows provinces to participate in the immigration process in several ways. But this participation has always been within a statutory and regulatory framework promulgated by the Canadian government. So, if the provinces were abusing their powers under this system (dubious), the federal government has always been able to do something about it. Moreover the Trudeau liberals and their NDP partners have had collectively a legislative majority for nine years, so they could have addressed provincial misbehavior.
The good news though is that Canadians see through the CBC and Trudeau’s bullshit about immigration federalism.
These are all temporary people technically. And both the provinces and private sector were clamoring for them. We still absolutely need immigration, depending on the region.
They also likely blunted some of the inflation numbers by suppressing low end wages to an extent.
In any case, it will be interesting to see GDP per capita numbers in a couple of quarters as temporary workers and student numbers dwindle, and GDP is revised.
One that doesn't get spoken about us how hacking and corporate espionage basically killed Nortel and other really good Canadian tech companies. As you said, it's really hard to grow your economy when you are a country the size of Canada and you aren't exporting services or niche technology. I don't think it can be understated what the lack of tech industry success has done to Canada as well over the last 15 years.
Yeah a weird thing with Canada is that each province can set their own tariff, so the Canadian market, being small as it is, just fragmented even more. Even Argentina has an unified market and prohibited interstate tariffs since its constitution of 1853 though!
That makes sense to me. As a USAnian, the idea of a "byzantine federal government structure" is nothing new, and doesn't seem to be holding the US back. But the US has single states as large as Canada in population, so the internal markets are large. And there is also the constitutional rule that interstate trade is a federal matter, so that "equivalent of a 20% average tariff between provinces" (bozhe moi!) doesn't exist.
And everything else as well. California just passed a law making it ILLEGAL for a school to have a policy of informing parents of their kid's use of a new name and/or pronouns at school. The New Jersey Attorney General is suing schools in his state that have adopted such a policy, claiming it is against existing NJ law. (The California AG did the same before the new law was passed.) The Biden DOJ is suing red states that have restricted sex-trait modification drugs and surgeries for childen. (Such restrictions follow the actual science, as confirmed by multiple systematic reviews by the not-for-profit medical systems of several European countries.) On and on.
And plenty of others think that sports are not particularly important. It’s just that they’re not the ones who bother to participate in discussions about sports, for obvious reasons.
Noah, something you got wrong here is that you assumed that non-oil patch productivity was stagnant during this period, which is it wasn't it tracked TFP in the United States during the same period (a pretty reasonable benchmark). What happened is the oil sector's Total Factor Productivity nosedived in the same time period. see the work of Loertscher and Pujolas while productivity growth the rest of the economy remained on trend.
The idea that productivity in the oil patch gets worse with time is unusual if we consider productivity to equal technology, but its probably more related to how the natural resource input into the economic stats isn't actually constant and it takes a lot lot more investment capital to produce the same barrel of crude in 2020 than it did in 1975. This is particularly noticeable as the Canadian industry became more and more dominated on extremely capital intensive oil sands methods
We also have other effects of living in the post-2014 environment that the American fracking boom made Canadian oil a lot less competitive as an investment for expanded production. So higher prices produces a greater return on investment on existing production but doesn't inspire the hell to leather expansion of the War on Terror days when the international oil market was throwing money hand over fist to get barrels away from high conflict areas of the globe.
Long story short, the outsized role of the unconventional oil sector in the Canadian economy does weird things to the productivity statistics, because you have a hugely important sector where massive capital investment is required to produce the same amount of the same product. The broad scale assumption of the Solow model that technology and knowledge is what's left when we take out capital and labour doesn't apply so neatly.
- Non-American advanced economies have been generally stagnant in this period. That the American tech sector centered on Silicon Valley is getting outsized growth while everyone else is stagnant seems to be a major story here, also that America is doing bonkers crazy huge fiscal stimulus on an already hot economy. Notably the only other G7 state seeing per capita rises is Italy and they clearly have some built in catch up growth to do after some bad decades plus are mirroring America in the bonkers huge stimulus. The Canadian story here doesn't look much different than its non-American peers and clearly America is Exceptional right now.
- Component Effects. Canadian population expanded a lot recently and it wasn't particularly due to the normal immigration streams although the government was of the view that those should be high post-pandemic, both to catch up on lost immigration during the pandemic and the economic reports that there was a post-pandemic labour crunch. But that wasn't the big reason the capita in per capita went way up. The biggest thing was student immigration which relates to post-secondary policy, in that Canadian universities have largely been forbidden to raise tuition much (domestic tuition cost isn't like Americas, its been sub-inflation growth for a long while due to legislated caps) and haven't been getting funding increases (subnational government in charge of this have had other priorities) so they've been heavily leveraging foreign students as cash cows. These numbers exploded lately, to the point that the Federal government (not supposed to be involved in education policy) has elected to step in with visa cap (this would have been considered a massive overreach of Federal authority and bitterly resisted by the Premiers even three years ago). On top of this the Temporary Foreign Worker program saw increases as well, but not nearly so big a story there as the students. This has added a whole lot more people whose GDP per capita would be in the 20-30 thousand a year range to the equation, which has pretty big pull downwards on the averages. Best as I can tell from the public numbers people have looked at, the per capita growth if you exclude TFW and students has gone up a decent but unspectacular amount in this time frame (inflation adjusted wages for this group have seen healthy increases for example) but small growth there gets swamped by big growth in low income categories so the aggregate number just looks flat.
-2003 through 2014 were highly unusually favourable for Canada for geopolitical reasons completely outside the countries control. The war on terror era caused a lot of Americans blowing up oil productions, America being concerned that unfriendly foreigners with oil will screw with them by using their oil leverage and a lot of Americans thinking that it would be nice to have safe and boring oil supplies, plus the price per barrel is generally real real high during this period. Coincidently, some clever Canucks in the 90s had largely worked out a process by which if you spend a metric fuck ton on up front physical capital you can turn an unappealing natural tar sand that closely resembles asphalt into a regular stream of heavy crude. The international capital market notices the opportunity and injects simply ludicrous amounts of investment capital into Western Canada to get in on this opportunity. This process is so capital intensive that labour wages are kind of an afterthought so it also involves paying low and high skilled workers huge dollars to come work in a remote and unpleasant part of the world to throw bodies at problems, so unlike a lot of other oil booms, this is broadly shared prosperity not just petrodollars captured in elite rents. This also pumps up the value of the local currency, so everyone in the country even those completely uninvolved see their wealth and incomes in international terms go way, way up as well.
Things change in 2014, because it was the Yankees turn to be clever about oil production and we see the fracking boom. This is a nightmare for the Canadian oil patch, because fracking is in a lot of ways the same market as them (massive capital investment to produce North American sourced crude) and generally a bit cheaper. oil sands production is also a big money upfront for a very long term payoff (oil sands projects don't decline nearly as fast as conventional oil wells) proposition and the price of oil in North America is both down and not likely to ever be as elevated in the future (because Yankees can make their own now) plus in the very long term oil is consumption is likely going toward because of electrification of transport. So the big international investment in the oil sands disappears and isn't coming back (even when prices recover, its a much less attractive investment opportunity). Because this is a big important export sector, the currency declines and the entire country looks less wealthy. So the 2014-2024 has a large amount of running as fast as you can to stay where you are at play, because they're in the process of catching up to an unsustainable highpoint.
- Housing theory of everything. the big economic engines in Canada that aren't oil related are the urban regions of the BC Lower Mainland and Southern Ontario (of which the GTA is the biggest but not only part). The Canadian housing market didn't crash in 2008 so it didn't get a price correction, it just kept going up, plus population growth as been very high so moderate to low home construction isn't keeping up with demand. So prices just keep going up, particularly in an international macro market where interest rates are incredibly low. So way to much entrepreneurial energy goes to low value land speculation. Plus cost of living is way higher than it should be, which is really bad for what should be a big strength of that market, work for American firms taking advantage of lower wages, because cost of living is high despite the lower local wage. This has greatly hobbled Canadian ability to take advantage of the tech boom. Its also given local government a host of bad incentives, because they've developed a tax structure where massive development fees to arbitrage the price people are willing to pay for homes is used instead of property taxes, which drives prices even higher. There's a lot of lost dynamism in the major urban centers that could come back if the housing market successfully unfucks itself. By comparison, Edmonton and Montreal have gained a lot of ground on Vancouver an Toronto lately because those two cities have (for very different reasons) much less fucked housing situations.
I would add that the housing market is also massively skewed because of those two metro areas. You go outside the GTA and Lower Mainland, and you can still find reasonably priced housing, but then you leave outside of those areas and their amenities.
The one thing this runup has caused is some much needed growth is some of the hinterlands (e.g. here in NB...though that has also caused incumbentitis)
The EROI on tar sands oil is actually pretty horrifying, I think it's down as low as 2.9:1, meaning that you're burning one unit of oil for every ~3 units extracted. This would make no economic sense at all except for the fact that the extraction is being fueled with "free" gas drawn from the same wells. Back in 2013 it seems to have been higher, around 5:1, which might be a measurement artifact or reflect the fact that EROI is getting worse.
This is obviously an environmental disaster. It's also feels like an economic disaster in the making. As renewables displace oil consumption (yes, this is going to happen), it's hard to see anyone wanting to extract this oil in the future. There is much cheaper oil all over the world: at a lower price point does this oil even make sense to extract, even if we don't take into account the CO2 emissions?
The economic argument is that an oil sands project is only expensive to build, not that expensive to operate and lasts for a really long time. So its expected to be reasonably competitive on the very long term scenario where oil transitions to its non-fuel uses.
On the emissions front, oil sands takes more CO2 to produce an equivalent barrel than other methods matters a fair bit less than it sounds, the big emissions from oil production come from when you burn it for fuel, not the things you burned to make it.
1. In a hypothetical 2050/2060 world where somehow all of our oil usage is restricted to non-fuel uses, do we need oil sands projects? Is there a shortage of non-fuel oil from other sources (in the 21st century) once we stop burning oil for energy?
2. In a world where we actually succeed in approaching net-zero, does it make sense from an emissions perspective to burn gas in order to extract oil sands for non-fuel usage? (Keeping in mind the 3:1 or 2:1 EROI.)
3. If we don't burn that gas -- say, we use renewable energy or nuclear to extract the oil for non-fuel uses -- would oil sands make any economic sense?
4. Not a question, just a comment. From an environmental perspective, "an oil sands project is only expensive to build, not that expensive to operate and lasts for a really long time" is an extremely good argument for blocking the construction of these things with every tool available.
Well the EROI your citing seems significantly off, I've never seen a calc lower than 4 at the lowest which will also vary from project to project, so revise your priors there.
As for the enviromental impact, the current businesses think they'd be able to change the technology such that it will be low emissions in the future to produce, whether that is possible or not is an open question right now. Most of the rest is things we won't really know until the future.
Ok, the 2.9:1 number turns out to be an estimate for deeper, non-surface tar sands, which is why it's so low.
I'm still curious if there's a need for tar sand oil in a world where we've mostly eliminated the need to burn oil as fuel. My understanding is that current oil usage for that application accounts for more than 90% of all oil pumped. If we miraculously get to net-zero by 2050/2060 that would seem to free up a lot of alternative oil sources for non-energy applications. Are tar sands still important in that world? I'm really asking.
(If we don't get oil consumption down to those levels by 2050/60, I'm a bit skeptical that there's going to be much of a global industrial civilization in the 21st century to consume that tar sands oil, but maybe I'm just a pessimist.)
The question there is whether this is because they have a broader range of export commodities or whether it reflects actual strengths of the Australian economy beyond that.
Yeah, from the 1960s Donald Horne already described Australia as "a lucky country ran by second-rate people who shares its luck", and only lived through inventions of others.
Even though Australia has great universities and research institutes (CSIRO - the national science agency, is pretty well-known for its inventions of Wi-fi, plastic banknotes, Aerogard sprays for example), little R&D spending is done in high-tech industries though. A Chinese researcher on solar panel could not apply his work in Australia, so he ended up going back to China and now becomes a billionaire there!
Just because Donald Horne said that, does not make it at all true. Australia is a leading economy and scores extremely highly in human development measures and you don’t get that just through resources. There are many countries with resources who are far less developed. Not everything is perfect of course, as per your solar story, but these things happens in all countries and Australia is in fact an innovation powerhouse. Read this more balanced assessment by an English journalist: https://www.theage.com.au/national/let-s-rethink-the-lucky-country-australia-s-fortune-was-never-dumb-luck-20241219-p5kzmf.html
Median matters more than average for the average Joe. Germany overtook Australia because it invested in R&D. Curiously, so did Canada likely due to spillover effects from the exponential growth in the US
Ok, but Australia was a long way behind Germany for many years then overtook for about last 20 and now quite close. And does median consumption like that align with your view that Australia is “barista landlords masquerading as a country”. Next try median wealth by country.
Australia is third by median wealth but that's shifting goalposts. Most of that wealth is property whose value is likely far removed from its fundamental value
I honestly don't have the time to go through this in great detail but yes, services is the fastest-growing sector in Australia "which in 2017 comprised 62.7% of the GDP and employed 78.8% of the labour force"
Ergo yes, Australia's economy is relatively simpler to understand. Is it one of the richest countries in the world? Yes. Has its government done a better job managing the economy than many others? Yes. However, it's blessed with resources and as a haven for potential immigrants like myself. To bring that cost of living down requires greater immigration and stronger antitrust policies. To puncture the real estate bubble requires more affordable housing to be built and for young Australians to give up on their dream of a suburban house with a yard and accept life in apartments/units. Oh, and the perverse incentives whereby they can most easily reduce their high tax burden by accumulating real estate needs to be removed altogether.
Australia can be like the US but its parties don't have the political will and its people aren't as open to immigration as they once were.
Virtually all Anglo countries - notably *except* the US - have seen ever-poorer productivity growth in the last decades.
In my humble opinion, a major reason for that is the permitting system that seemed to go wrong in a similar way in all these places from the late 1970s onwards, with a worsening trend since the 1990s.
Depending on external circumstances, growth spurts and productivity improvements were still possible - oil for Canada, commodities to China for Australia, finance and entertainment for the UK - but those either come to a sudden stop at some point or their gains are slowly eaten up by the ever-creeping income gains destroyer of rising housing, living, building and permitting costs.
It's a problem the UK, Australia, New Zealand and Canada all share and seem reluctant to actually tackle head-on.
Arguably yes. But in the first three post-war decades, there was lots of public building of housing, so the overall housing stock still increased considerably.
When that stopped - and private building failed to pick up enough, not least due to permitting issues - the country entered an area of ever-higher housing costs.
The whole trend was exacerbated from the 1990s onwards when the UK stopped to even invest in things like reservoirs or new train tracks and the like. And the costs of that lack of investment have been piling up ever since.
Canada simply lacks many internationally competitive industries. They got some natural resouces (Barrick Gold, CNRL) , aerospace( Bombadier, CAE) , banks & finance (TD Bank, RBC, Brookfield). But they lack other sectors. Their technology sector is lacking (except Shopify), no one buys Canadian brand cars, they are an FDI hub for American brands. Their semiconductor, medical tech, consumer electronics,and biopharm is lacking.
Is entrepreneurship not in their culture as much? It's interesting.
This is the historically been part of the double-edge sword of American proximity. Being close to a massive economy on the technological frontier has meant getting American advancements before anyone else, but American competition tends to strangle Canadian brands in the cradle. Developing big national firms to compete would probably involve the kind of Japanese, French or Korean style dirigisme that is not politically palatable and there aren't the domestic institutions to operate successfull and would have a bunch of other economic costs.
What’s your take on Jim Balsillie‘s editorials on a more active IP development agenda? Do you find it unrealistic given the power of American business capital?
I don't know if Balsillie has the right ideas in how to fix the problems, but it's a well known issue that Canadian education is first rate and produces excellent human capital and basic research awhile Corporate Canada doesn't do much research at all and doesn't capitalize on local public output.
I think American proximity is definitely a factor on why that's the case I think, there's a structural tendency for those investments to be harvested by someone else and a lack of moonshots that cover the other bets.
100% this. We have some large players but they are mostly legacy, built before globalization.
Capital is highly mobile, and so is high end human capital. We have tons of great startups but when they start scaling, the pull of deeper capital pockets to the south of the border makes scaling easier and quicker. Our internal markets isn't large enough to allow for that scaling.
And there is the internet maturity thing happening. Hard to build a new google or microsoft. We had RIM (since Balsillie was mentioned) but they didn't/couldn't/wouldn't pivot for the broader market? Nortel was pirated. We do have Shopify (and some others making a go).
We have to get back to building things. New energy infrastructure should help both in terms of immediate multipliers, but also on ensuring energy costs to continue attracting new development. Hoping to see the new nuclear build start this year.
Though it seems to me that whether productive businesses are owned by the US or even headquartered in the US isn't very important as long as a lot of the work is done in Canada. (And certainly US multinational companies have no loyalty to doing the work in the US if doing it in Canada leads to higher profits.) But the relative ease of skilled workers moving between the countries could make a big difference.
The doom of East Germany was sealed once young, well-educated, skilled workers to emigrate to the West, because they could get paid better in the West. Note that statement is equivalent to "the income inequality in the West was higher than the East".
No, it clearly does not have enough. What I am saying is that the majority of the economic wealth of many Canadians, and a considerable portion of their incomes (whether it is to pay their mortgages or rents) goes towards their housing. Adding to that, you have a considerable amount of foreign investment tied to residential housing in Canada.
If housing costs over the past 30 years had grown at more reasonable levels, that would have meant that more of the income earned and savings of Canadians would have gone to other parts of the economy.
Canada is not a capitalist state, it is a Banana Republic saved only by the rule of law that was the only good thing the British left behind. And it seems to me in the few years I have lived here that the level of understanding of economics is paltry, even among the elite.
Instead Canada is led by a criminal enterprise combining politics, media, big business, academics and bureaucrats known as the Laurentian Elite (names after the St Lawrence river that flows through Monreal and Toronto.
But as long as they all stick together there is no way to get caught. But outsiders should stop wasting their time advocating for change.
Some random thoughts and examples to back up my rather strident introduction.
1. Milk and cheese are twice as expensive as in the U.S. because large dairy producers get subsidies and price protection they haven't needed since the small farms disappeared. I sometimes see a yacht from a rich Italian (mafia) outfit getting maintenance in the small inefficient city of Victoria.
2. Telecom services are about twice as expensive for worse service. It got so bad that even the Trudeau government felt it had to step in and regulate lower prices during the "affordability crisis" everybody has been talking about. Perhaps that is where he lost the support of the deep state!!!
3. There is no free trade between provinces... so they mostly trade with the United States.
4. A long-running excuse is "we have a large territory so we have to xxxxx (fill in the stupid idea that will get you nowhere). But 90 percent of the population live on the US border, Vancouver is just 100 miles from Seattle (where salaries are higher and prices are lower). Montreal is 250 miles from Boston, and 450 miles from New York and Toronto is 230 miles from Detroit and the northeastern industrial hub... so no....there is no excuse for not having a competitive industrial base.
5. Everybody wants affordable housing, but instead of policies to achieve that we get virtue signaling governments making it harder to build the homes we need by insisting on a set number of "affordable units". I have nothing against helping people out, but when you only help 20 in every million while not tackling the larger issues, then you must be a Canadian politician. The one thing we have too much of is land.... but much is reserved for Agricultural use, which isn't being used, including land close to urban centers that need more shelter!
6. Building codes now ensure that most dwellings in BC can withstand a twin assault by Earthquake and Tsunami without waking those sleeping inside.
7. We have free healthcare. YAY! Often have to wait more than a week to see a GP, and a specialist can take more than a year to get you a sorely (get it?) needed hip replacement.
In sum: Organized crime is in charge, which is why I always remind the bright young things in the cellphone store that they work for the mob. And they just sigh and nod their heads.
In the end the economic boom in Canada happens when oil, timber and mineral prices boom, and the rest of the time we look for ways to shoot ourselves in the foot while benefitting a small set of people, usually unionized (and unlikely the ones to need help in a downturn).
If at this point you are reaching for some BC bud, I really don't blame you.
I apologize in advance for not reading through what I wrote, but I need an escape clause!
As a Canadian living this timeline, this is a welcome and thoughtful analysis, and I would wager it to be quite accurate. Well done as always Noah, especially in teasing out the suffocating effect of regulatory and governmental roadblocks to creating an innovative ‘real’ economy.
I also think that Canadians sense that in a geo-political sense, war has returned to our collective doorsteps (both economic and militaristic) after a relatively peaceful period.
Although none of the current potential leaders seems a good candidate to lead us into this returning global climate of conflict, we just know he’s ‘not it’.
A uber-liberal PM who's all on in Green everything presided over the transition of his country from a manufacturing hub to a petrostate. You've got to admit, that's hilarious.
And Noah, that OEC tool is amazing. I'm going to give my econ students some exercises with it when we do our unit on international trade. Thanks.
I work for a company that, among other things, sells electric meters. We have recently been trying to get approval to sell our meters in the Canadian market.
One use case for smart meters is called “loss compensation”. The basic idea is that we want to physically locate our meter in a different point from the contractual billing point (usually for ease of installation). The method is to calculate the energy at the metering point, calculate the losses between the metering and billing points, and add them together.
We were rejected by the Canadian government because their standard states you have to add up the losses over a billing period then add them in at the end (a relic of the old electromechanical days), whereas we add it in at each instant and report both the compensated and uncompensated values at the end. When I explained to the regulator that adding in a value piecewise over a month is exactly the same as adding it at the end, he told me that he doesn’t care if the methods are mathematically equivalent—we’re not meeting the regulation so we’re not getting approved.
I imagine lots of this goes on in other industries as well and is part of what’s holding Canada back.
Thanks for threading the needle to land on the conclusion of “Trudeau didn’t break it, but he sure didn’t fix it, either”, which is correct and more nuance than you see in the public debate right now.
Don't use the Fraser institute. They are total hacks.
I remember one time there was a startling statistic. "40,000 Canadians had fled Canada to get better healthcare" The purpose was clear. They were trying discredit Canada's health system in the eyes of Americans.
This was in the Blaze, essentially an American right wing site.
I tracked the source and it quoted something by the Fraser institute. I looked at that and the Fraser institute said that this was based on their annual survey of Canadian doctors.
Digging into that survey, I found the question. It was "What percentage of your patients have received non emergency care outside of Canada last year?"" The answers from their survey was "about 1%".
Now this didn't ask why they received the care. Perhaps they got food poisoning on an Italian vacation. But that didn't stop the Fraser institute, they had a mission and that mission is making Americans believe that Canadian healthcare is awful. So the Fraser institute multiplied out that 1% by all Canadian patients and wrote a report where 40,000 Canadians are "fleeing" the dire state of Canada's health care.
It was total hackery.
The bit quoted in this piece where the the Fraser institute blames leftism without saying how exactly is par for the course.
The 2016 report says 1% of Canadians or 63,459 patients received non emergency medical care outside of Canada. You are the one misrepresenting the report. And getting food poisoning treated while in Italy would be considered emergency care. I don’t know who are total hacks, but their report is more detailed, and you get more facts wrong complaining about it.
https://www.fraserinstitute.org/sites/default/files/leaving-canada-for-medical-care-2017.pdf
Thanks for the link. It shows the hackery right there. (For the record, I was looking at the 2015 report when I noticed this)
This quote leads the report.
" In 2016, an estimated 63,459 Canadians received non-emergency medical treatment outside Canada."
This is probably true.
The hackery comes in the next bullet.
"Physicians in British Columbia reported the highest proportion of patients (in a province) receiving treatment abroad (2.4%). The largest number of patients estimated to have LEFT THE COUNTRY FOR treatment was from Ontario (26,513)."
The Fraser institute assumes that anyone who is receiving non emergency treatment abroad was travelling specifically to get that treatment. That's their own explanation. The doctors didn't say that. The patients didn't say that.
The question on the survey was "Approximately what percentage of your patients received non-emergency medical treatment in the past 12 months outside Canada?" (Page 2)
There is no "why did they leave Canada?" "Were they seeking medical care abroad?".
A Canadian student studying in Germany who goes to the doctor for a sore throat would fall under the question.
The Fraser institute assumes that all Canadians who received health care abroad were travelling specifically to get healthcare.
But there is no evidence. The Fraser institute only knows that some Canadians received non emergency healthcare outside of Canada. They purposely make up their own explanations, all of which are "the Canadian health system sucks".
Read the report again. Find the part where they have any evidence of why the 63,000 people in the report are outside of Canada.
You won't.
Because they are parisan hacks.
Also, in 2019 an estimated 780k Americans went on trips abroad specifically for healthcare. If anything, 1% of Canadians receiving non emergency healthcare abroad for any reason, is a good looking statistic for Canadian healthcare, at least compared to the US.
Be aware there is a burgeoning private medical services industry in Canada, which usually involves patients travelling to another providence. Quebec has all sorts of private medical clinics offering pay-for-service orthopaedic procedures to Canadians; hip and knee replacements and minimal invasive spine procedures especially. The benefit is billing in Canadian dollars and reduction of financial risk if something goes wrong. A Canadian getting a knee replacement in the US is exposed to limitless expense if something - such as a stroke during anesthesia - goes wrong.
For what it's worth, I think Canada is suffering from a variation of the issues other medium-sized developed countries are having. No developed country with a comparable population to Canada is doing amazingly economically right now. I think this is because once you get to this tens of millions size, you start to become so big that you find it harder to occupy small economic niches (like Ireland) and to find political consensus (like Singapore).
But you also lack the large internal markets and investment pools of the biggest countries, like China or the US. One manifestation of Canada's economic problems is the presence of oligopolies: airline and supermarket duopolies, a similar lack of competition in banking and telecoms, and so on. This is obviously related to the internal market issue: how many more airlines and banks could you support in a country with just over 40m people? The EU managed to partially overcome this problem by creating a large single market, but it is still badly integrated for capital markets and services.
These issues are then compounded in Canada by a number of factors, including:
- Its complex and byzantine federal government structure
- The country's sheer size and lack of good infrastructure links across all of it
- A larger, richer neighbour that Canada has a close relationship with but is also frightened of
- Over-dependence on commodities exports
- A (mostly) Anglo aversion to building housing and infrastructure, like the US, UK, and Australia.
The byzantine federal structure is something people really have difficulty getting their heads around. Prime example in the post by Noah, he naturally assumed the growth in the number of foreign students was a Trudeau policy, because you'd naturally think that falls under immigration which you'd assume is entirely Federal.
But it isn't, it was a Provincial level policy decision, which you can see by how it was so concentrated to Ontario in particular. Firstly that immigration isn't entirely a Federal constitutionally (its an unusual joint area), secondly that student immigration policy is treated as an Education policy, not a Federal immigration policy. The Provinces write the policy about how many foreign students they want and since this was last hashed out in the 80s the Feds were supposed to be confined to the role of processing the paperwork. In real terms, this makes perfect sense, the Federal government has no higher education bureaucracy, it has no idea what's appropriate and no way to find out, and the other concern with student immigrants, local services and housing are likewise Provincial level concerns. That the Federal government responded to public outcry by proposing a Provincial level student visa cap caused one academic to observe that the Minister of Immigration had just de facto became the first Federal minister of higher education.
Not to blame Noah for not understanding any of this. He's doing a quick take on at best third to fifth hand information, most of which is put out their by people pushing their own political agendas, and most Canadian citizens are fairly in the dark about how this all works because its a complex web of compromises and arrangements that don't accord with how you'd think it would work from first principles. If I had a comment to the host, its merely that this is an expected problem with doing quick look analysis of countries you don't have much familiarity with based on a quick dive into some stats.
Credit for classically Canadian passive-aggression, but, no, Noah is correct that the Canadian federal government is to blame for immigration issues. The BNAA of 1867, which is a part of Canada’s constitution, made “Naturalization and Aliens” exclusively federal jurisdiction. Section 91.25. So, no matter what the provinces were doing, Ottawa is ultimately to blame for dysfunctional immigration.
To be sure, the federal government allows provinces to participate in the immigration process in several ways. But this participation has always been within a statutory and regulatory framework promulgated by the Canadian government. So, if the provinces were abusing their powers under this system (dubious), the federal government has always been able to do something about it. Moreover the Trudeau liberals and their NDP partners have had collectively a legislative majority for nine years, so they could have addressed provincial misbehavior.
The good news though is that Canadians see through the CBC and Trudeau’s bullshit about immigration federalism.
These are all temporary people technically. And both the provinces and private sector were clamoring for them. We still absolutely need immigration, depending on the region.
They also likely blunted some of the inflation numbers by suppressing low end wages to an extent.
In any case, it will be interesting to see GDP per capita numbers in a couple of quarters as temporary workers and student numbers dwindle, and GDP is revised.
One that doesn't get spoken about us how hacking and corporate espionage basically killed Nortel and other really good Canadian tech companies. As you said, it's really hard to grow your economy when you are a country the size of Canada and you aren't exporting services or niche technology. I don't think it can be understated what the lack of tech industry success has done to Canada as well over the last 15 years.
Not to mention that you are next to an elephant.
Labour (and capital) mobility to the US is still relatively easy for higher end talent.
It's also true that the digital revolution skews all GDP comparisons with the US. FAANG is a huge driver of this disparity.
Yeah a weird thing with Canada is that each province can set their own tariff, so the Canadian market, being small as it is, just fragmented even more. Even Argentina has an unified market and prohibited interstate tariffs since its constitution of 1853 though!
That makes sense to me. As a USAnian, the idea of a "byzantine federal government structure" is nothing new, and doesn't seem to be holding the US back. But the US has single states as large as Canada in population, so the internal markets are large. And there is also the constitutional rule that interstate trade is a federal matter, so that "equivalent of a 20% average tariff between provinces" (bozhe moi!) doesn't exist.
No one knows how to pronounce Poilievre's name, so it's impossible to mispronounce.
"Polliver" it is!
Pwha-lee-evrah and you can put the "rhgh" on the "r" at the end if you want to impress all the yokels.
High marks.
What's amusing is hearing even Canadian news outlets be slightly different.
From Prime Minister Pollyanna to Prime Minister Pwha-lee-evrah
Love him
Among his former Cabinet colleagues, he is known as 'Skippy', so many of us just go with that.
I swear I didn't make this up.
I think Pollivee is perfect lol
"There’s a big fight over trans issues."
Well, according to your link, one side of this "fight" has a huge majority:
• Respondents oppose teaching children that “There is no such thing as biological sex, only gender preference” by 85 to 15;
• By an 80 to 20 margin, people oppose attempts to cancel gender-critical feminists J.K. Rowling and Kathleen Stock;
• Canadians oppose gender reassignment surgery for under-16s by 4 to 1;
• Respondents, by a 2 to 1 ratio, want parents informed when children under age 16 change pronouns at school;
• Respondents, by a 2 to 1 ratio, do not want transgender women to enter women’s sports competitions
Of course Canada, like the US, is not a democracy, so overwhelming majority preference makes little difference if the elites have decided otherwise.
This seems to be a survey that is taking some unpopular ideas and pushing them as representative of the debate.
plenty of trans activists want gender dysphoric men to compete in women’s sports
And everything else as well. California just passed a law making it ILLEGAL for a school to have a policy of informing parents of their kid's use of a new name and/or pronouns at school. The New Jersey Attorney General is suing schools in his state that have adopted such a policy, claiming it is against existing NJ law. (The California AG did the same before the new law was passed.) The Biden DOJ is suing red states that have restricted sex-trait modification drugs and surgeries for childen. (Such restrictions follow the actual science, as confirmed by multiple systematic reviews by the not-for-profit medical systems of several European countries.) On and on.
And plenty of others think that sports are not particularly important. It’s just that they’re not the ones who bother to participate in discussions about sports, for obvious reasons.
Noah, something you got wrong here is that you assumed that non-oil patch productivity was stagnant during this period, which is it wasn't it tracked TFP in the United States during the same period (a pretty reasonable benchmark). What happened is the oil sector's Total Factor Productivity nosedived in the same time period. see the work of Loertscher and Pujolas while productivity growth the rest of the economy remained on trend.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4417319
The idea that productivity in the oil patch gets worse with time is unusual if we consider productivity to equal technology, but its probably more related to how the natural resource input into the economic stats isn't actually constant and it takes a lot lot more investment capital to produce the same barrel of crude in 2020 than it did in 1975. This is particularly noticeable as the Canadian industry became more and more dominated on extremely capital intensive oil sands methods
https://worthwhile.typepad.com/worthwhile_canadian_initi/2024/06/tfp.html
We also have other effects of living in the post-2014 environment that the American fracking boom made Canadian oil a lot less competitive as an investment for expanded production. So higher prices produces a greater return on investment on existing production but doesn't inspire the hell to leather expansion of the War on Terror days when the international oil market was throwing money hand over fist to get barrels away from high conflict areas of the globe.
Long story short, the outsized role of the unconventional oil sector in the Canadian economy does weird things to the productivity statistics, because you have a hugely important sector where massive capital investment is required to produce the same amount of the same product. The broad scale assumption of the Solow model that technology and knowledge is what's left when we take out capital and labour doesn't apply so neatly.
What’s your take on lagging GDP per capita?
Big and complex, but the main bullet points.
- Non-American advanced economies have been generally stagnant in this period. That the American tech sector centered on Silicon Valley is getting outsized growth while everyone else is stagnant seems to be a major story here, also that America is doing bonkers crazy huge fiscal stimulus on an already hot economy. Notably the only other G7 state seeing per capita rises is Italy and they clearly have some built in catch up growth to do after some bad decades plus are mirroring America in the bonkers huge stimulus. The Canadian story here doesn't look much different than its non-American peers and clearly America is Exceptional right now.
- Component Effects. Canadian population expanded a lot recently and it wasn't particularly due to the normal immigration streams although the government was of the view that those should be high post-pandemic, both to catch up on lost immigration during the pandemic and the economic reports that there was a post-pandemic labour crunch. But that wasn't the big reason the capita in per capita went way up. The biggest thing was student immigration which relates to post-secondary policy, in that Canadian universities have largely been forbidden to raise tuition much (domestic tuition cost isn't like Americas, its been sub-inflation growth for a long while due to legislated caps) and haven't been getting funding increases (subnational government in charge of this have had other priorities) so they've been heavily leveraging foreign students as cash cows. These numbers exploded lately, to the point that the Federal government (not supposed to be involved in education policy) has elected to step in with visa cap (this would have been considered a massive overreach of Federal authority and bitterly resisted by the Premiers even three years ago). On top of this the Temporary Foreign Worker program saw increases as well, but not nearly so big a story there as the students. This has added a whole lot more people whose GDP per capita would be in the 20-30 thousand a year range to the equation, which has pretty big pull downwards on the averages. Best as I can tell from the public numbers people have looked at, the per capita growth if you exclude TFW and students has gone up a decent but unspectacular amount in this time frame (inflation adjusted wages for this group have seen healthy increases for example) but small growth there gets swamped by big growth in low income categories so the aggregate number just looks flat.
-2003 through 2014 were highly unusually favourable for Canada for geopolitical reasons completely outside the countries control. The war on terror era caused a lot of Americans blowing up oil productions, America being concerned that unfriendly foreigners with oil will screw with them by using their oil leverage and a lot of Americans thinking that it would be nice to have safe and boring oil supplies, plus the price per barrel is generally real real high during this period. Coincidently, some clever Canucks in the 90s had largely worked out a process by which if you spend a metric fuck ton on up front physical capital you can turn an unappealing natural tar sand that closely resembles asphalt into a regular stream of heavy crude. The international capital market notices the opportunity and injects simply ludicrous amounts of investment capital into Western Canada to get in on this opportunity. This process is so capital intensive that labour wages are kind of an afterthought so it also involves paying low and high skilled workers huge dollars to come work in a remote and unpleasant part of the world to throw bodies at problems, so unlike a lot of other oil booms, this is broadly shared prosperity not just petrodollars captured in elite rents. This also pumps up the value of the local currency, so everyone in the country even those completely uninvolved see their wealth and incomes in international terms go way, way up as well.
Things change in 2014, because it was the Yankees turn to be clever about oil production and we see the fracking boom. This is a nightmare for the Canadian oil patch, because fracking is in a lot of ways the same market as them (massive capital investment to produce North American sourced crude) and generally a bit cheaper. oil sands production is also a big money upfront for a very long term payoff (oil sands projects don't decline nearly as fast as conventional oil wells) proposition and the price of oil in North America is both down and not likely to ever be as elevated in the future (because Yankees can make their own now) plus in the very long term oil is consumption is likely going toward because of electrification of transport. So the big international investment in the oil sands disappears and isn't coming back (even when prices recover, its a much less attractive investment opportunity). Because this is a big important export sector, the currency declines and the entire country looks less wealthy. So the 2014-2024 has a large amount of running as fast as you can to stay where you are at play, because they're in the process of catching up to an unsustainable highpoint.
- Housing theory of everything. the big economic engines in Canada that aren't oil related are the urban regions of the BC Lower Mainland and Southern Ontario (of which the GTA is the biggest but not only part). The Canadian housing market didn't crash in 2008 so it didn't get a price correction, it just kept going up, plus population growth as been very high so moderate to low home construction isn't keeping up with demand. So prices just keep going up, particularly in an international macro market where interest rates are incredibly low. So way to much entrepreneurial energy goes to low value land speculation. Plus cost of living is way higher than it should be, which is really bad for what should be a big strength of that market, work for American firms taking advantage of lower wages, because cost of living is high despite the lower local wage. This has greatly hobbled Canadian ability to take advantage of the tech boom. Its also given local government a host of bad incentives, because they've developed a tax structure where massive development fees to arbitrage the price people are willing to pay for homes is used instead of property taxes, which drives prices even higher. There's a lot of lost dynamism in the major urban centers that could come back if the housing market successfully unfucks itself. By comparison, Edmonton and Montreal have gained a lot of ground on Vancouver an Toronto lately because those two cities have (for very different reasons) much less fucked housing situations.
That was solid. Thanks for taking the time.
Bravo! Best overall answers.
I would add that the housing market is also massively skewed because of those two metro areas. You go outside the GTA and Lower Mainland, and you can still find reasonably priced housing, but then you leave outside of those areas and their amenities.
The one thing this runup has caused is some much needed growth is some of the hinterlands (e.g. here in NB...though that has also caused incumbentitis)
Thanks for the summary, it’s quite good.
The EROI on tar sands oil is actually pretty horrifying, I think it's down as low as 2.9:1, meaning that you're burning one unit of oil for every ~3 units extracted. This would make no economic sense at all except for the fact that the extraction is being fueled with "free" gas drawn from the same wells. Back in 2013 it seems to have been higher, around 5:1, which might be a measurement artifact or reflect the fact that EROI is getting worse.
This is obviously an environmental disaster. It's also feels like an economic disaster in the making. As renewables displace oil consumption (yes, this is going to happen), it's hard to see anyone wanting to extract this oil in the future. There is much cheaper oil all over the world: at a lower price point does this oil even make sense to extract, even if we don't take into account the CO2 emissions?
The economic argument is that an oil sands project is only expensive to build, not that expensive to operate and lasts for a really long time. So its expected to be reasonably competitive on the very long term scenario where oil transitions to its non-fuel uses.
On the emissions front, oil sands takes more CO2 to produce an equivalent barrel than other methods matters a fair bit less than it sounds, the big emissions from oil production come from when you burn it for fuel, not the things you burned to make it.
Ok, but some questions:
1. In a hypothetical 2050/2060 world where somehow all of our oil usage is restricted to non-fuel uses, do we need oil sands projects? Is there a shortage of non-fuel oil from other sources (in the 21st century) once we stop burning oil for energy?
2. In a world where we actually succeed in approaching net-zero, does it make sense from an emissions perspective to burn gas in order to extract oil sands for non-fuel usage? (Keeping in mind the 3:1 or 2:1 EROI.)
3. If we don't burn that gas -- say, we use renewable energy or nuclear to extract the oil for non-fuel uses -- would oil sands make any economic sense?
4. Not a question, just a comment. From an environmental perspective, "an oil sands project is only expensive to build, not that expensive to operate and lasts for a really long time" is an extremely good argument for blocking the construction of these things with every tool available.
Well the EROI your citing seems significantly off, I've never seen a calc lower than 4 at the lowest which will also vary from project to project, so revise your priors there.
As for the enviromental impact, the current businesses think they'd be able to change the technology such that it will be low emissions in the future to produce, whether that is possible or not is an open question right now. Most of the rest is things we won't really know until the future.
Ok, the 2.9:1 number turns out to be an estimate for deeper, non-surface tar sands, which is why it's so low.
I'm still curious if there's a need for tar sand oil in a world where we've mostly eliminated the need to burn oil as fuel. My understanding is that current oil usage for that application accounts for more than 90% of all oil pumped. If we miraculously get to net-zero by 2050/2060 that would seem to free up a lot of alternative oil sources for non-energy applications. Are tar sands still important in that world? I'm really asking.
(If we don't get oil consumption down to those levels by 2050/60, I'm a bit skeptical that there's going to be much of a global industrial civilization in the 21st century to consume that tar sands oil, but maybe I'm just a pessimist.)
I'd really like to see similar analysis on Australia
Australia has done considerably better.
The question there is whether this is because they have a broader range of export commodities or whether it reflects actual strengths of the Australian economy beyond that.
If Russia is a 'gas station masquerading as a country', Australia is a 'mine run by barista landlords masquerading as a country' is my understanding
Yeah, from the 1960s Donald Horne already described Australia as "a lucky country ran by second-rate people who shares its luck", and only lived through inventions of others.
Even though Australia has great universities and research institutes (CSIRO - the national science agency, is pretty well-known for its inventions of Wi-fi, plastic banknotes, Aerogard sprays for example), little R&D spending is done in high-tech industries though. A Chinese researcher on solar panel could not apply his work in Australia, so he ended up going back to China and now becomes a billionaire there!
Just because Donald Horne said that, does not make it at all true. Australia is a leading economy and scores extremely highly in human development measures and you don’t get that just through resources. There are many countries with resources who are far less developed. Not everything is perfect of course, as per your solar story, but these things happens in all countries and Australia is in fact an innovation powerhouse. Read this more balanced assessment by an English journalist: https://www.theage.com.au/national/let-s-rethink-the-lucky-country-australia-s-fortune-was-never-dumb-luck-20241219-p5kzmf.html
No need to display your ignorance to the world
https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F0a71203e-22e6-4f4c-8b8f-fb9068ede671_1360x972.jpeg
https://ourworldindata.org/grapher/daily-median-income?tab=chart&country=USA~AUS~DEU~GBR~FRA~CAN~ITA~JPN
Median matters more than average for the average Joe. Germany overtook Australia because it invested in R&D. Curiously, so did Canada likely due to spillover effects from the exponential growth in the US
Ok, but Australia was a long way behind Germany for many years then overtook for about last 20 and now quite close. And does median consumption like that align with your view that Australia is “barista landlords masquerading as a country”. Next try median wealth by country.
Yes, it does.
Australia mostly exports iron, natural gas and coal so that's how the corporate sector mostly thrives
https://oec.world/en/profile/country/aus#:~:text=About,the%20Economic%20Complexity%20Index%20(ECI)
Australians are heavily incentivised to be landlords
https://www.youtube.com/watch?v=_TUVXfM1nqo
Australia is third by median wealth but that's shifting goalposts. Most of that wealth is property whose value is likely far removed from its fundamental value
https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult
I honestly don't have the time to go through this in great detail but yes, services is the fastest-growing sector in Australia "which in 2017 comprised 62.7% of the GDP and employed 78.8% of the labour force"
https://en.wikipedia.org/wiki/Economy_of_Australia
Ergo yes, Australia's economy is relatively simpler to understand. Is it one of the richest countries in the world? Yes. Has its government done a better job managing the economy than many others? Yes. However, it's blessed with resources and as a haven for potential immigrants like myself. To bring that cost of living down requires greater immigration and stronger antitrust policies. To puncture the real estate bubble requires more affordable housing to be built and for young Australians to give up on their dream of a suburban house with a yard and accept life in apartments/units. Oh, and the perverse incentives whereby they can most easily reduce their high tax burden by accumulating real estate needs to be removed altogether.
Australia can be like the US but its parties don't have the political will and its people aren't as open to immigration as they once were.
https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F05c33c13-2a4f-42fc-ae14-75da9fcf3559_1020x720.jpeg
That's a bit harsh. But it's true that the dependence of Australia on commodity exports is a tricky one.
More than half is iron and coal, mostly to China, so not too much of a broader range.
The Economist wrote one up at one point, even coining the term Ozanada in the process (it did not catch on):
Australia and Canada are one economy—with one set of flaws
https://www.economist.com/business/2023/06/01/australia-and-canada-are-one-economy-with-one-set-of-flaws
from The Economist
Seconding this! Long term paid subscriber Noah, would love to see your breakdown on Australia’s economy 🫡
I wish we had a Republican leader like Pierre Poilievre in the States. Would make me feel a lot more comfortable voting Republican.
Can you expand on this for someone who hasn't been following Canadian politics?
I feel the same, why can’t we have sort of nice things?
Virtually all Anglo countries - notably *except* the US - have seen ever-poorer productivity growth in the last decades.
In my humble opinion, a major reason for that is the permitting system that seemed to go wrong in a similar way in all these places from the late 1970s onwards, with a worsening trend since the 1990s.
Depending on external circumstances, growth spurts and productivity improvements were still possible - oil for Canada, commodities to China for Australia, finance and entertainment for the UK - but those either come to a sudden stop at some point or their gains are slowly eaten up by the ever-creeping income gains destroyer of rising housing, living, building and permitting costs.
It's a problem the UK, Australia, New Zealand and Canada all share and seem reluctant to actually tackle head-on.
Don't the UK's permitting problems go all the way back to the Town and Country Planning Act 1947?
Arguably yes. But in the first three post-war decades, there was lots of public building of housing, so the overall housing stock still increased considerably.
When that stopped - and private building failed to pick up enough, not least due to permitting issues - the country entered an area of ever-higher housing costs.
The whole trend was exacerbated from the 1990s onwards when the UK stopped to even invest in things like reservoirs or new train tracks and the like. And the costs of that lack of investment have been piling up ever since.
Canada simply lacks many internationally competitive industries. They got some natural resouces (Barrick Gold, CNRL) , aerospace( Bombadier, CAE) , banks & finance (TD Bank, RBC, Brookfield). But they lack other sectors. Their technology sector is lacking (except Shopify), no one buys Canadian brand cars, they are an FDI hub for American brands. Their semiconductor, medical tech, consumer electronics,and biopharm is lacking.
Is entrepreneurship not in their culture as much? It's interesting.
My understanding is that promising new companies quickly get bought out by US and foreign interests.
This is the historically been part of the double-edge sword of American proximity. Being close to a massive economy on the technological frontier has meant getting American advancements before anyone else, but American competition tends to strangle Canadian brands in the cradle. Developing big national firms to compete would probably involve the kind of Japanese, French or Korean style dirigisme that is not politically palatable and there aren't the domestic institutions to operate successfull and would have a bunch of other economic costs.
What’s your take on Jim Balsillie‘s editorials on a more active IP development agenda? Do you find it unrealistic given the power of American business capital?
https://www.caninnovate.ca/p/on-the-roots-of-canadian-productivity-problems?utm_medium=web&triedRedirect=true
https://nationalpost.com/opinion/an-outdated-myth-about-business-investment-is-hurting-the-canadian-economy
I don't know if Balsillie has the right ideas in how to fix the problems, but it's a well known issue that Canadian education is first rate and produces excellent human capital and basic research awhile Corporate Canada doesn't do much research at all and doesn't capitalize on local public output.
I think American proximity is definitely a factor on why that's the case I think, there's a structural tendency for those investments to be harvested by someone else and a lack of moonshots that cover the other bets.
100% this. We have some large players but they are mostly legacy, built before globalization.
Capital is highly mobile, and so is high end human capital. We have tons of great startups but when they start scaling, the pull of deeper capital pockets to the south of the border makes scaling easier and quicker. Our internal markets isn't large enough to allow for that scaling.
And there is the internet maturity thing happening. Hard to build a new google or microsoft. We had RIM (since Balsillie was mentioned) but they didn't/couldn't/wouldn't pivot for the broader market? Nortel was pirated. We do have Shopify (and some others making a go).
We have to get back to building things. New energy infrastructure should help both in terms of immediate multipliers, but also on ensuring energy costs to continue attracting new development. Hoping to see the new nuclear build start this year.
Japan is not that closed off, it's mostly that they don't speak English and have a large enough population to make their own things.
Though it seems to me that whether productive businesses are owned by the US or even headquartered in the US isn't very important as long as a lot of the work is done in Canada. (And certainly US multinational companies have no loyalty to doing the work in the US if doing it in Canada leads to higher profits.) But the relative ease of skilled workers moving between the countries could make a big difference.
The doom of East Germany was sealed once young, well-educated, skilled workers to emigrate to the West, because they could get paid better in the West. Note that statement is equivalent to "the income inequality in the West was higher than the East".
I would like to see a report on how much local and foreign investment has gone directly into residential housing.
To me it seems that so much of Canada's value is trapped in residential housing, it makes sense that other areas of the economy stagnate.
In America, the average person not only more but spends less on housing, leaving more income to be spent / invested elsewhere.
Are you saying that Canada has too much housing, rather than not enough?
No, it clearly does not have enough. What I am saying is that the majority of the economic wealth of many Canadians, and a considerable portion of their incomes (whether it is to pay their mortgages or rents) goes towards their housing. Adding to that, you have a considerable amount of foreign investment tied to residential housing in Canada.
If housing costs over the past 30 years had grown at more reasonable levels, that would have meant that more of the income earned and savings of Canadians would have gone to other parts of the economy.
Indeed. Similar problem in the UK and to some degree also in Australia and New Zealand.
Canada is not a capitalist state, it is a Banana Republic saved only by the rule of law that was the only good thing the British left behind. And it seems to me in the few years I have lived here that the level of understanding of economics is paltry, even among the elite.
Instead Canada is led by a criminal enterprise combining politics, media, big business, academics and bureaucrats known as the Laurentian Elite (names after the St Lawrence river that flows through Monreal and Toronto.
But as long as they all stick together there is no way to get caught. But outsiders should stop wasting their time advocating for change.
Some random thoughts and examples to back up my rather strident introduction.
1. Milk and cheese are twice as expensive as in the U.S. because large dairy producers get subsidies and price protection they haven't needed since the small farms disappeared. I sometimes see a yacht from a rich Italian (mafia) outfit getting maintenance in the small inefficient city of Victoria.
2. Telecom services are about twice as expensive for worse service. It got so bad that even the Trudeau government felt it had to step in and regulate lower prices during the "affordability crisis" everybody has been talking about. Perhaps that is where he lost the support of the deep state!!!
3. There is no free trade between provinces... so they mostly trade with the United States.
4. A long-running excuse is "we have a large territory so we have to xxxxx (fill in the stupid idea that will get you nowhere). But 90 percent of the population live on the US border, Vancouver is just 100 miles from Seattle (where salaries are higher and prices are lower). Montreal is 250 miles from Boston, and 450 miles from New York and Toronto is 230 miles from Detroit and the northeastern industrial hub... so no....there is no excuse for not having a competitive industrial base.
5. Everybody wants affordable housing, but instead of policies to achieve that we get virtue signaling governments making it harder to build the homes we need by insisting on a set number of "affordable units". I have nothing against helping people out, but when you only help 20 in every million while not tackling the larger issues, then you must be a Canadian politician. The one thing we have too much of is land.... but much is reserved for Agricultural use, which isn't being used, including land close to urban centers that need more shelter!
6. Building codes now ensure that most dwellings in BC can withstand a twin assault by Earthquake and Tsunami without waking those sleeping inside.
7. We have free healthcare. YAY! Often have to wait more than a week to see a GP, and a specialist can take more than a year to get you a sorely (get it?) needed hip replacement.
In sum: Organized crime is in charge, which is why I always remind the bright young things in the cellphone store that they work for the mob. And they just sigh and nod their heads.
In the end the economic boom in Canada happens when oil, timber and mineral prices boom, and the rest of the time we look for ways to shoot ourselves in the foot while benefitting a small set of people, usually unionized (and unlikely the ones to need help in a downturn).
If at this point you are reaching for some BC bud, I really don't blame you.
I apologize in advance for not reading through what I wrote, but I need an escape clause!
As a Canadian living this timeline, this is a welcome and thoughtful analysis, and I would wager it to be quite accurate. Well done as always Noah, especially in teasing out the suffocating effect of regulatory and governmental roadblocks to creating an innovative ‘real’ economy.
I also think that Canadians sense that in a geo-political sense, war has returned to our collective doorsteps (both economic and militaristic) after a relatively peaceful period.
Although none of the current potential leaders seems a good candidate to lead us into this returning global climate of conflict, we just know he’s ‘not it’.
A uber-liberal PM who's all on in Green everything presided over the transition of his country from a manufacturing hub to a petrostate. You've got to admit, that's hilarious.
And Noah, that OEC tool is amazing. I'm going to give my econ students some exercises with it when we do our unit on international trade. Thanks.
That transition took decades and started in the 80s.
Re: Canadian regulation.
I work for a company that, among other things, sells electric meters. We have recently been trying to get approval to sell our meters in the Canadian market.
One use case for smart meters is called “loss compensation”. The basic idea is that we want to physically locate our meter in a different point from the contractual billing point (usually for ease of installation). The method is to calculate the energy at the metering point, calculate the losses between the metering and billing points, and add them together.
We were rejected by the Canadian government because their standard states you have to add up the losses over a billing period then add them in at the end (a relic of the old electromechanical days), whereas we add it in at each instant and report both the compensated and uncompensated values at the end. When I explained to the regulator that adding in a value piecewise over a month is exactly the same as adding it at the end, he told me that he doesn’t care if the methods are mathematically equivalent—we’re not meeting the regulation so we’re not getting approved.
I imagine lots of this goes on in other industries as well and is part of what’s holding Canada back.
Thanks for threading the needle to land on the conclusion of “Trudeau didn’t break it, but he sure didn’t fix it, either”, which is correct and more nuance than you see in the public debate right now.
Noah, I think you should have promoted YIMBYism for Canada a little more.