Canada Becomes Ayn Rand's Nightmare

February 28, 2023

A recently published article confirmed some economic data that I have been analyzing over the last few years indicating that the Canadian economy, as measured by GDP growth per capita has dramatically underperformed its neighbor to the south since Justin Trudeau took office. The numbers are date sensitive. I had the US outperforming Canada by about 12%. The article in question looked at the last ten year period and had a 14% US outperformance. Trudeau came to power in late 2015. Canada has been growing less than the US for decades but not every year. The last decade has been the worst relative period.

Liberal Party apologists desperately attempt to deflect blame. They say that former PM Harper was worse. Actually, the Canadian economy kept pace, for the most part under Harper despite the Great Financial Crisis and some terrible leftist Premiers in the larger provinces. They allude to the fact that every Western nation is struggling. Actually, Canada has been one of the worst, if not the worst performing economy.

This is no small feat since basket cases like Italy, Spain, Greece and increasingly the UK are in the sample. The Liberal government has lowered itself to intentionally using bullshit arguments. The two main ones are citing debt to GDP as relatively low by using the “net” figure and conveniently ignoring the massive provincial debt levels. The net figure is nonsense since the Federal government will not just be able to raid the public pension plans of Canadians. Those pension assets are not the government's money. They are the citizens investments needed for retirement. This argument would be like Larry Fink of Blackrock including the total assets under management of the company in his personal net worth. Almost no normal country uses the “net” figure. They use gross debt to GDP. Also, Canada is a relatively decentralized federalist system. Provincial debt must be included when comparing fiscal health with other nations. For example, the U.K. is a unitary system. It doesn't have provinces or US style state governments. Incidentally, US states do not have anywhere near the debt levels of Canadian provinces.

The Canadian government's fiscal chicanery is not confined to the debt situation. The government constantly harps on that GDP is growing. They leave out the fact that they are referring to overall GDP growth or the size of the overall economy instead of GDP per capita. Canada's so called growth is driven by immigration. Per capita growth is dead in the water as the chart below suggests.

The Canadian economy has effectively had zero growth in the last five years. We have had recessions in the post World War II period . In every case, GDP per capita was higher five years after the start than it was just before the recession. This is not a business cycle issue. Canada is a nation in a systemic decline and importing immigrants that are economically less productive than the average of the native population is making matters worse. The S&P 500 Index returned 14.5% annualized over the ten years ended December 31, 2023, almost double the return of the TSX at 7.5%.

Stock returns do not necessarily correspond to economic growth in perfect synchronicity but it is yet another indicator of Canada’s economic anemia. Even GDP per capita does not fully capture the decline of Canada, but the way people live does. We looked at average income in the U.S. and Canada and substracted average rent and food costs. Although few people are average, this does give us an indication of how much people have left after food and shelter. The result was astonishing. The dollar amount left over from income was twice as high for Americans as it was for Canadians, and we did not even deduct taxes. Average US income was $59,300; rent $16,000 and food 9,000 leaving $34,300. In Canada, the numbers were income $47,000; rent 20,000, food 10,000 leaving $17,000.

Canada has been in decline for decades and has our fall has accelerated under the Trudeau. In defense of the government they had a lot of help crashing the economy. Canada’s largest three provinces Ontario, Quebec and B.C. have been plagued by terrible provincial governments since the late 1970’s with rare exceptions. Those provinces make up 75% of Canada’s total population. Provinces are more powerful and spend more money in relative terms than states in the U.S. Also, never forget that the Trudeau regime was elected three times in free and fair elections. Until the latest polls, at least two-thirds of Canadians support socialists whether they called themselves Liberals, New Democrats, Bloc Quebecois supporters or Greens. Even many Conservative voters favored Hillary Clinton and Joe Biden over Donald Trump. Perhaps Canadians got what they deserved.

Many use the novels 1984 and Brave New World to describe the dystopia the Western world seems headed for. I think Atlas Shrugged by Ayn Rand was the most prophetic. In that novel, the productive were leached off by the “moochers” and “looters” as Rand described them. Moochers took from the producers by using tears. Looters used physical compulsion in the name of social justice. Eventually, the productive fled society and the best and brightest ended up living in their own enclave called Galt’s Gulch. Perhaps, now is the time for people to move to their own Galt’s Gulch. These gulch’s may be red states and counties in the U.S., places like Poland and Hungary, Uruguay, Israel and areas of Asia. In any event, life will be more peaceful and less dangerous.