The former Canada Pension Plan Investment Board (CPPIB) CEO says that while the federal government’s 2024 budget focuses on redistribution, more attention needs to be allocated toward Canada’s lagging productivity.
Mark Wiseman, the former CPPIB CEO and current chairman of Canada at Lazard, said in an interview with BNN Bloomberg Tuesday that much of the government’s most recent budget focuses on redistribution, but it “didn’t talk enough” about productivity issues. Last week Canada’s federal government tabled its 2024 budget, with new taxes to help offset billions in new spending on housing supply and social supports.
“If the pie is larger, there's more to redistribute. And if we're not growing the pie, we can't spend, the way that we're spending ad infinitum,” Wiseman said.
“So we need to start a conversation about growing the pie. We need to start a conversation about how we increase productivity in this country so that we are actually growing what's really important, ultimately, which is median GDP (gross domestic product) per capita.”
While productivity issues have been a long-standing issue in Canada’s economy that successive governments have spoken about, he said that the main focus should be on making Canadians “more prosperous” over the medium to longer term.
“We've been struggling with a productivity gap and falling productivity relative to our peers in this country for a long time. So this isn't a new problem. It's also not an easy problem to solve, but we've got to start talking about it,” Wiseman said.
Wiseman’s sentiment was echoed by Carolyn Rogers, the Bank of Canada’s senior deputy governor, last month who described the issue as an economic emergency.
Address productivity issues
According to Wiseman, one of the main factors weighing on Canada’s productivity is interprovincial trade barriers. He said figures from the London School of Economics estimate trade barriers between provinces cost the Canadian economy around $100 billion annually.
“It's as if we have a tariff in our country,” Wiseman said.
“We're worried about tariffs coming in (from) a potential Trump administration between Canada and the U.S. We have tariffs between our provinces.”
He said that these barriers impact the movement of labour and goods between regions and that governments need to work to reduce barriers to make it easier for Canadians to do business “not across the border of the country, but across the borders within the country.”
Another way to address lagging productivity, according to Wiseman, is to incentivize innovation. He said AI investments in the budget will work to address the issue to some degree.
“We need to encourage innovation in the country, both in the private sector and in government,” he said.
“And that includes, making sure that Canadian corporations are spending more on research and development, both to increase the quality of human capital and productive, physical capital as well.”