WHAT CANADA NEEDS TO PROSPER

Government tax revenue (when not wasted) is what builds countries into great nations.  And as much as we all don’t like taxation, most of us understand that it is the basis for the infrastructure we associate with a good life.  Things like schools, hospitals, roads, police etc are all here because of it.

There are two core sources of tax.  Revenue that is taken from a country’s citizens or its corporations.  To effectively ‘grow the nation’ over decades, governments need steady growth of both personal and corporate income which exceeds inflation.  To do so there is a fundamental need to maximize the country’s intrinsic assets and work continuously to improve productivity, while at the same time avoiding the temptation to borrow excessively. 

Here in Canada, successive governments (both federal and provincial) have done a mediocre job on these fronts for decades now.  The cumulative effect of such mediocrity is causing significant stress on our population.   It will continue to do so well into the foreseeable future without decisive action today.

The Importance of Macroeconomics

From a macro perspective, a country must start with fundamental truths about the geographical location in which it exists, the resources it can access and the number of people that the country serves.

A big landmass for instance is both positive and negative.  On one hand, large areas of land typically come with abundant natural resources.   These provide economic opportunities for both corporations and the workers they employ. 

The caveat here is that large countries need a critical mass of people to be able to pay for today’s modern infrastructure.  Eg. So as you’ll see below, it’s not surprising that Canada has the highest cell phone costs in the world with only 4 people per square kilometre.

Secondly, international trade requires access to tidewater to be competitive.   Ocean-bound freight is roughly 80% cheaper than other means of transport which is why landlocked countries are rarely economic champions and often go to war to ensure their access to oceans.   

Furthermore, access to trading partners in as many directions as possible is undeniably beneficial as well. 

Lastly, we come down to population density. Fundamentally, the number of people per square kilometre is critical. The more people, the higher the economic activity as well as the more stable the tax base.

Examples of population per square kilometre

For Canada to maintain, keep pace and or grow faster than its peers it needs an efficient tax base. With only four people per square kilometre, we need to ensure maximum revenue from our resources so as not to over-tax individual citizens.

Fortunately, Canada is rich in natural resources including rare earth metals, oil & gas, timber and farmland. 

For the country to become the nation we aspire to, we must maximize these natural attributes.  This means that our leaders need to prioritize the extraction, processing and shipment of our products to willing trade partners.

This brings us to one of the fundamental challenges we have here in Canada. With such a large diverse country, understandably, we’re going to have numerous special interest groups – all of whom feel that their own group’s interest should supersede national concerns. 

Unfortunately, it has become a national obsession to appease everyone here in Canada.  The result has become a continual backsliding of our economic stability both here at home and on the world stage.  Accordingly, we grow at half the rate we could while having to count on massive immigration to fund our future obligations (such as CPP).

This approach has significant downsides.

Special interests need to take a backseat if we’re going to be able to finance the country’s growth, our massive debt and generous social programs.  In a country like ours, with a limited population, we simply do not have the tax base to support everything and thus revenue generation must be prioritized.   

Ironically, Saudi Arabia may be one of the best examples.  Their single-minded approach to resource extraction and shipment provides the abundance of finance needed to grow prosperously into the future. 

Its game-changing NEOM project under construction is the “utopian” future that is being built solely on oil profits because of its single-minded focus. 

Canada is NOT keeping up

Here in Canada, we’re not raising the revenue needed to do these kinds of NEOM projects because rather than focusing on our traditional resource-based assets, we’re focused on appeasing everyone and we’re already paying a price for it.

It’s sad but true that Canada has never seen such a large foreign investor selloff.  Compared to other industrialized nations, we fall far short of being truly competitive.   Accordingly, it’s easy to see that the fantastic lifestyle many of us take for granted is under threat.  It’s not much of a leap to see that future generations of Canadians will pay the price for the country not keeping up with other industrialized nations. 

It’s time for us to focus on our traditional resource base assets like oil and gas, mining and forestry.  Doing so will provide the revenue needed to support our future generations living in what we think is the best country in the world.