We could grow like a Celtic Tiger too, if we had Irish policies

[Anonymous]

Canada is foreign invest laggard and that is the fault of doubling down on failed government policies for the last seven years.



Instead, political risk, glacial permitting and transportation bottlenecks discourage companies from coming here



The Irish economy continues to impress and the Canadian economy to disappoint. Ireland was the only OECD country to grow in 2020, its GDP rising by 3.4 per cent. Boosted by pharmaceutical and technology exports, Ireland even out-grew China by a percentage point. Canada, meanwhile, ranked 135th in the world in terms of growth.



The "Irish miracle" goes back to the 1980s when the government adopted a highly successful pro-growth strategy. No longer the poor cousin it had been for two centuries, the Irish economy has become the fourth richest in the world in per capita GDP (in $US), after only Luxembourg, Singapore and Qatar. The Celtic Tiger's success has been attributed to several factors, including upgrading talent through education, substantial infrastructure investment, access to EU markets and money, deregulation, social cohesion and a pro-growth tax structure with one of the lowest corporate income tax rates in the world at 12.5 per cent.



While its GDP growth has been impressive, the Irish domestic economy has had its bumps, including weak financial regulations that led to a sharp contraction for several years following the 2008 financial crisis. But more recently, driven by foreign investment and exports, Ireland's household disposable income growth has outstripped most OECD countries'. From 2015 to 2019 inflation-adjusted disposable income grew by 4.5 per cent a year, compared to 2.0 per cent in the EU and 1.9 per cent in Canada.



Ireland is over-the-top when it comes to investment. As the chart shows, public and private fixed capital formation more than doubled from 2015 to 2019, far outstripping every other advanced country, including second-place Hungary (corporate tax rate of just nine per cent) and third-place Estonia, with its unique corporate tax on distributed profits. In contrast, Canadian investment shrank 0.5 per cent. Even the Brexit-challenged United Kingdom did better than Canada, with 5.8 per cent cumulative growth — mediocre by world standards, though we'd take it.

https://smartcdn.prod.postmedia.digital/financialpost/wp-content/uploads/2021/03/fp0326-jack-mintz.png?quality=90&strip=all&w=472&type=webp">

https://financialpost.com/opinion/jack-m-mintz-we-could-grow-like-a-celtic-tiger-too-if-we-had-irish-policies">https://financialpost.com/opinion/jack- ... h-policies">https://financialpost.com/opinion/jack-m-mintz-we-could-grow-like-a-celtic-tiger-too-if-we-had-irish-policies

[Anonymous]

Continued



Investment is critical to economic growth and rising household incomes. Companies that invest in capital can produce more product per working hour of labour. Higher labour productivity enables companies to bid more for workers, which means higher wages. It is no surprise that industries with the highest value-added per working hour, like oil/gas, mining and utilities, also pay the highest hourly wages.



Even better, when companies buy new machines and structures, they typically adopt the most advanced technologies. Many companies with strong investment programs, whether pharma, telecommunications or forestry, also tend to invest in finding new ideas.



Let's face facts. Canada is not very appealing to investors these days



So why has Canada's investment performance been so disappointing since 2015? The sharp decline in oil, gas and mining prices after 2014 caused companies to delay investment plans as they dealt with squeezed profit margins. But that can't be the whole story. Resource-based Australia had the same trouble as Canada, but resource-based Norway did relatively well.



And it wasn't just oil and gas investment that declined. Investment also contracted in: agriculture fishing and forestry; finance, insurance and leasing; and retail trade. It did grow in transportation and warehousing, as well as information and culture, while the one year in which manufacturing investment grew — 2019 — gave that sector a small net increase for the four years. But for the economy as a whole, investment contracted.



Let's face facts. Canada is not very appealing to investors these days. Our strongest trade advantages are in the resource sector, from agriculture to energy to mining. But political risk, glacial permitting and transportation bottlenecks discourage companies from coming here. We have had some success in information industries because of our good education system, but we have no particular comparative advantage in the digital economy. Many of our most successful businesses sell out to foreign buyers, leaving technical work to Canadian branch-plants. Even in clean energy, we have little manufacturing – if you want to build solar panels and windmills, you have to go to China or Denmark.



Unlike other federal states, such as Australia, Canada has weak internal trade with provincial barriers to trade and labour mobility. My University of Calgary colleague Trevor Tombe has estimated that a 10 per cent reduction in internal trade costs would increase Canada's GDP by three to seven per cent. Alberta has unilaterally reduced its barriers, but so far other provinces continue their trade restrictions.



Federal and provincial governments have undermined growth with overzealous regulation and have made a 180-degree turn in tax policy since 2015. After 2000, they reduced personal and corporate taxes, but that stopped by 2013. Since then, governments have pushed personal income taxes on entrepreneurs and skilled labour to some of the highest levels in the OECD. They have increased business costs with new excise taxes (e.g., on insurance premiums), carbon levies and taxes on land transfers, property and payrolls. With unprecedented post-pandemic public deficits looming, political parties will play the "tax the rich" game while in fact hitting the middle class with new taxes, since that's where the real money is.



It seems the federal Liberals will push for a June election after bringing down a budget with new deficit-financed spending to "reset" Canada. Will the opposition parties offer anything better? The real challenge facing Canada is to address our woefully inadequate investment performance. Nothing else is as important to our long-run prosperity.

[Anonymous]

This can't go on indefinitely without a negative impact on living standards.

[Anonymous]

Economic nationalism will produce better results for blue collar workers than economic liberalism.

[Gaon]

The government of Israel encourages investment. It doesn't seem the prime minister of Canada wants growth.

[Anonymous]

The government of Israel encourages investment. It doesn't seem the prime minister of Canada wants growth.

I don't think our prime minister cares about that.

[Renee]

The government of Israel encourages investment. It doesn't seem the prime minister of Canada wants growth.

I don't think our prime minister cares about that.

Far left politicians love to shit where they eat...They haven't got enough brains to understand that eventually the tax dollar they depend on will run out...Especially when you put all your energy into promoting a dependent class on the backs of taxpayers.

[Anonymous]

The government of Israel encourages investment. It doesn't seem the prime minister of Canada wants growth.

I don't think our prime minister cares about that.

He is a lackey of China, the UN, and the Davos gang.