The unemployment rate in Canada is as high now as it was in the lowest year of the Great Greenspan-Bernanke Great Depression, the USA economic depression that bled into Canada.
As I shared with others, this is truly bad news on the Canadian economy.
One of every five Canadian dollars earned by Canadians comes from selling products to US residents. If the USA economy is booming as claimed, with record low unemployment, the Canadian economy should be growing along with it. After all, in effect, Canada practically is the 51st state of the USA.
Falling employment is a signal of contraction, though much further along in that contraction than people realize. Employment is a laggard since contracts tend to be honored. So even when an economy turns southward, employment tends to remain for awhile as already contracted work gets worked to completion.
What is the fundamental problem with the Canadian economy?
In short, the answer is not enough capitalism. That is caused by too many immigrants, which increases the working-age population faster than the return to capital. This keeps down wages and since wages are the source of prices, this keeps down future capital spending. It becomes a vicious cycle.
As well, equalization payments lets inefficient economies and governments exist, e.g., Quebec, while leeching off relatively in efficient ones, e.g., Alberta.
How Canadian Provinces and Territories Stack Up to US States
The article started me to wonder about how Canadian life compares financially to US residency life. So, I had to whip up the numbers for myself and for you.
As you can see, Canadians are poor in most provinces, especially the Maritime Provinces as well as in Quebec.
Overall Canadian GDP per capita adjusted for purchasing power parity and the USD / CAD exchange rate is $48,306.
The US State figures reflect a cost of living adjustment for each state. Taxation in both Canada and the USA by provinces, states and federally, respectively makes living worse.
How to Fix Canada's Economy
The exact acts to fix the Canadian economy are what politicians do not want to do as they are beholden to the richest Canadians, the people who tend to support the Liberals.
First, immigration needs to stop, and not for months, but for years. I have explained this many times on the True Dollar Journal why this is so.
What holds true for the USA also holds true for Canada. See my work, UNFETTERED IMMIGRATION IS KILLING AMERICAN CAPITALISM.
In a nutshell:
- Wages come from the return to capital.
- Wages set all other prices.
- Increasing the working-age population faster than the return to capital rate makes true wages fall (not current dollar wages).
- When real wages fall, true prices fall (not current dollar prices).
- When real prices fall, the true returns to capital fall.
- When the true returns to capital fall, future capital investment falls.
- When future capital investment falls, future returns will be lower and thus future wages will be lower.
- In order to maintain profits by maintaining productivity, firms must increase the working-age population.
- And with that, an economy returns to Step 3.
Second, equalization payments need to end.
Because of equalization, the inefficient provincial economies and provincial governments have no checks against them, no natural forces to force change among the behavior of adults living in these provinces.
There are too many Canadians living in the Maritime Provinces, however sparse the population seems to be already, as well as too many living in Quebec and not enough living elsewhere.
Also, the wrong kinds of industries are being fostered, such as the make-work welfare sector, i.e., government work, or "public" sector, and not enough people taking the raw materials of Canada and converting those via machinery (capital) into manufactured products.
Productive Canadians living in Alberta and Saskatchewan are suffering economic bloodletting for the remainder of Canada. This is so to a lesser extent for those living in BC or Newfoundland and Labrador.
By all rights, Canadians should have among the highest per capita incomes on earth, incomes rivaling Norwegians, which is estimated to be US$74,356 per person adjusted for purchasing power parity. To see why, check out my work, CONFUSED BILL CLINTON SAYS AMERICANS NEED IMMIGRANTS. NORWEGIANS VS AMERICANS.
In short, Norwegians kept their population growth small and thus amplified their extant workers with machines. That made them richer because that is how true capitalism works. Norwegians have exploited their resources-rich country with natural population.
The Canadians have followed the USA model of importing people. That makes people poorer than they otherwise should be.
Look at resources-poor countries like China and India. These countries each have over 1.3 billion residents. Their nations are poor because the capital spending per resident is low. It is low because the returns on capital never can be high enough to justify the investments. It is simply cheaper to throw bodies at every production problem.
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