Changing narratives

As Canadians, we like to think we’re strong and free. But as SCP's Director of Policy Dan Skilleter explains, when it comes to the wealth gap, we're looking more like America Lite—better manners, but almost all the inequality. The way our economy is set up means that most of the benefits from economic growth go to financial interests and speculators, rather than to workers or other businesses. We can shift economic power to more people and aspiring entrepreneurs by making them owners. When more people have a stake, Canada’s economy works better for everyone—not just investors.

Approving a sale of Parkland to Sunoco may be attractive to the government because it would add US$9 billion to Canada’s total foreign direct investment (FDI), which politicians often tout as an indicator of national economic health. But, as SCP Fellow Sarah Doyle and SCP Chair Jon Shell write, total foreign direct investment is not a good reflection of the underlying strength of the economy. Plus, this deal would bring none of the benefits typically associated with FDI. It is unlikely to lead to increased capital investment, more or better jobs, or technology transfer into Canada. In fact, its impact may be just the opposite. If there ever was a deal with almost no Canadian winners, this is it. Ottawa should say no to Sunoco.

At the recent Victoria Forum, community and philanthropic leaders outlined creative community finance and impact investment ideas that could mobilize big pools of private capital to invest in local businesses, social purpose organizations and community infrastructure. However, as SCP CEO Matthew Mendelsohn writes, despite the growing maturity of the social finance community, Canada still lacks the social and community financing infrastructure and policies to make this happen. With some important fixes to fragmented financing and outdated regulatory frameworks, the coming Budget could make it easier for social finance investments to properly scale and deliver the kind of outsized impact Canada needs at this time.

Levels of our country's Foreign Direct Investment, or FDI, do not actually tell us much about the state of the economy. One large deal can significantly affect total FDI inflows, which can vary dramatically from year to year. Plus, as SCP Fellow Sarah Doyle and SCP Chair Jon Shell write, not all FDI is created equal. Distinguishing between beneficial and harmful FDI is even more important now, in the context of a global trade war and threats to Canada’s economic sovereignty. In this explainer, they unpack FDI: what it is, when it is and isn’t beneficial and why understanding these nuances matters.

Neil Corbett of the Maple Ridge-Pitt Meadows News reports on locally based Taproot Community Support Services making some business history in Canada. Taproot's 750 employees in B.C., Alberta Ontario will now own 100 per cent of the business, becoming the largest Employee Ownership Trust (EOT) in Canada and the first in the social services sector. Finance minister Francois-Philippe Champagne explains why this is a perfect example of what EOTs can do, calling the trusts "a powerful, timely tool that helps Canadian employees become owners of the businesses they work for, while helping entrepreneurs find the right people to carry their legacy forward."

Rather than using the tax system to prevent wealth concentration, our current tax system promotes it. Those who earn income from their investments have more income left over after taxes, allowing them to accumulate wealth more quickly than others. SCP Fellow Silas Xuereb explains how, south of the border, we are witnessing the consequences of runaway wealth inequality – billionaires use their media conglomerates to get political favours, exploit the instruments of the state to enrich themselves and, increasingly, secure political office. All of these trends are leading to the erosion of democracy and public policy that advances the interests of the wealthy at the expense of everyone else. If Canada does not rebalance our tax system to prioritize work over wealth, we may soon find ourselves on the same path.

Breaking Points podcast correspondent James Li sits down with corporate lawyer, economic analyst and SCP Fellow Rachel Wasserman to discuss Trump's executive order opening up 401k plans to private equity. Trends show that with rising interest rates and frozen exit markets, the private equity investment model could be under serious stress. So, what are the implications of making this type of investment available to retail investors and their retirement plans? Rachel walks James through how private equity works, what's so dangerous about the buyout-PE model and who might get left holding the bag. 

New research by economist and SCP Fellow Gillian Petit estimates what Canada’s GDP per capita would have been over the past decade if Canada had kept our temporary resident numbers stable. On CBC political podcast West of Centre, host Rob Brown asks Petit to dissect the metric politicians love to wield. GDP measures total output, while GDP per capita divides that sum by the population. She explains that the simple math offers an easy snapshot, but can mislead when used alone. For a true read on prosperity, Petit argues Canada needs a broader economic dashboard that weighs productivity, fairness and long term well being.

Over the last couple of years, there have been countless articles warning of Canada’s poor economic performance. The mic drop has increasingly been Canada’s poor performance relative to peer countries on “GDP per capita,” with growth rankings used to draw a variety of sweeping, negative conclusions about Canada’s economy. SCP CEO Matthew Mendelsohn and Policy Director Dan Skilleter draw on economist and SCP Fellow Dr. Gillian Petit's new research to explain why GDP per capita is a deeply flawed measurement for evaluating rich countries - and is easily influenced by a variety of factors having little to do with economic performance or economic well-being.

New research by economist and SCP Fellow Gillian Petit estimates what Canada’s GDP per capita would have been over the past decade if Canada had kept our temporary resident numbers stable. She also estimates the expected impact on GDP per capita in the coming years due strictly to planned reductions in Canada's intake of non-permanent residents. Among key findings: Canada’s GDP per capita is misleading and should not be used as if it were the sole indicator of economic well-being. Plus, if we had maintained our temporary resident numbers at two percent of the population in recent years, Canada’s GDP per capita would look much more like our peer countries: a little bit ahead of countries like Germany, the United Kingdom and Australia and a little bit lower than countries like Belgium, Sweden and France.