Bank of Canada’s unproductive productivity speech

March 28, 2024| Blog
By Matthew Mendelsohn

Why did the Senior Deputy Governor of the Bank of Canada give a speech on productivity that could have been given in the 1990s?

I just read the speech from the senior deputy governor of the Bank of Canada that says that Canada’s long-standing poor performance on productivity is an “emergency.” As far as I can tell, there was not one real idea in that speech, and almost nothing that hasn’t been said for 30 years.

And then the Public Policy Forum, which is about to do its annual Growth Summit, re-posted the speech claiming that their summit would focus on “fixing productivity once and for all.”

The narrowness and orthodoxy of the Bank and our public discourse on these issues is a problem.

I hope the PPF panels will have new insights. The presence of Indigenous leaders is great. Labour and climate perspectives add value. Global perspectives are important. But it seems a lot is missing.

Reading the speech, and looking at the topics of the panels, I have a few questions:

Where is childcare? Where is housing? And particularly, will there be a critique of investor activity in residential real estate that absorbs so much Canadian capital and I would assume impacts our productivity numbers? (I would guess that some of the panelists have personally contributed to this problem). Where is public transit and the impact of gridlock and commutes on productivity?

Where is a reflection on how the structure of capitalism has changed dramatically and is dominated by a few American-based platforms that generate huge profits from surveillance, data, IP, scale, GAI, and anti-competitive behaviour? How much of our productivity gap with the US is explained by these tech giants? Where is a reflection on the role of private equity, which is transforming many sectors?

“And what about wealth distribution? I don’t want to live in a country where our productivity goes up marginally but ¾ of our grandchildren are serfs. I really don’t want my grandkids to be serfs.”

And why do so many of our firms innovate on skimming fees from consumers, rather than doing real innovation on products, processes or price?

And what about wealth distribution? I don’t want to live in a country where our productivity goes up marginally but ¾ of our grandchildren are serfs. I really don’t want my grandkids to be serfs.

These issues were absent from the speech and, to my friends at PPF, prove me wrong! I hope you can orchestrate discussions that don’t sound like the ones I listened to in the 1990s (and participated in during the 00’s)!

At least no one seems to be talking about the importance of lowering corporate taxes to increase productivity anymore, because that was clearly BS. So I guess that’s good!

These are not my areas of professional expertise (although I did do a paper for a federal task force on productivity in 1999 I think!), but it strikes me that we need to come at these issues with fresh ideas, fresh voices and fresh questions.

Changing narratives Productivity Wealth inequality What we’re exploring

Share with a friend

Related reading

BlogThe Ownership Solution

New research on the Big Banks and the businesses left behind

The productivity, resilience, inclusive growth and economic sovereignty objectives Canada is trying to achieve are not independent of its financing system. Canada ranks second-worst in the G7 as a place to be an entrepreneur, with 55 per cent of small-business owners saying they would not recommend starting a business here right now. A new SCP report by Michelle Arnold argues that this is not a reflection of the limits of our entrepreneurs, but the limits of our lenders - when it comes to SME financing, what the Big Banks can do is limited by how they're structured. If we want a stronger economy that works for workers, communities and small businesses, we need a financial system diverse enough to serve them.

ReportThe Ownership Solution

Built to Exclude: Why Canada’s enterprises need a different kind of financing | Report

Canada's enterprise financing system is dominated by big banks that control 93% of banking assets and nearly 80% of SME lending. While stable and respected, they have structural constraints—minimum deal sizes, rigid credit models, collateral requirements—that systematically stop them from lending to a range of viable businesses. The SMEs left behind include businesses looking for small loans, seasonal enterprises, non-profits, cooperatives and rural firms. If we continue to undercapitalize SMEs trying to get off the ground or grow, this will have cascading economic and social consequences. Canada needs alternative financing institutions that operate alongside commercial banking as permanent, scaled infrastructure.

Newsletter

👏 Letting the big W sink in

In the Spring Economic Update, the federal government moved to make the legislative structure and tax incentive for Employee Ownership Trusts (EOTs) permanent. This is amazing news! At Social Capital Partners, we are grateful that the government has made these changes. Thanks to Prime Minister Mark Carney, François-Philippe Champagne and Ryan Turnbull for understanding the importance of employee ownership. This and more all in one funny-but-factual biweekly read.

Skip to content