Canada’s Comparative Advantages

 [[{“value”:”Jay Martin writes a provocative post, Has Canada Become a Jamaican Bobsled Team? if Canada were to become a state, it would be the third poorest in the country, right behind Alabama. Everybody talks about the American debt issue, but Canadian households bear more debt relative to their income than any other G7 country. The average Canadian now spends 15% of their
The post Canada’s Comparative Advantages appeared first on Marginal REVOLUTION.”}]] 

Jay Martin writes a provocative post, Has Canada Become a Jamaican Bobsled Team?

if Canada were to become a state, it would be the third poorest in the country, right behind Alabama.

Everybody talks about the American debt issue, but Canadian households bear more debt relative to their income than any other G7 country. The average Canadian now spends 15% of their income on debt servicing.

This is a stark shift from 2008 when Canada emerged from the global financial crisis with a healthier balance sheet than any other G7 nation.

One indicator I pay close attention to is corporate investment per worker.

Every year, businesses invest in growth – new technology, new projects, new employees or products. If you take the total number that businesses invest during a calendar year, and divide that by the number of active workers in the country, you get the corporate investment per worker.

In the U.S., businesses invest about $28,000 per worker. In Canada, that number is only $15,000—nearly half.

Corporate investment is what drives future productivity, economic growth, and opportunity. The higher the number, the brighter the future.

What is Canada’s comparative advantage?

…we have vast natural resources, we have easy-to-navigate geography, we have the world’s longest coastline that spans three oceans – allowing direct access to every global market, and the largest shared international land border, on the other side of which is the worlds wealthiest, hungriest customer.

We have product. And we have a direct line to the consumer.

We are not capitalizing on these advantages because we have been sold a narrative discouraging investment in the industries where we outperform the world.

…The narrative that Canada should abandon its resource sector to pursue conceptual industries like hydrogen power or electric vehicle production is both misguided and damaging. These are fields where Canada has little experience or infrastructure, we are not competitive, and the evidence is in our economic data.

I would add one point. The issue shouldn’t be framed as extracting natural resources versus high-tech investment, as if mining, oil and gas, lumber and agriculture were simple brute-labor industries. In fact, there is plenty of room for artificial intelligence to dramatically increase the rate at which profitable mines are discovered. Industrial robotics and automation are the future of mining. Agriculture is a high-tech industry from genetic engineering to robotic laser weeding to satellite based based crop monitoring.

Indeed, Canada’s best chance to stay at the forefront of technology lies in exploiting its comparative advantages.

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 Economics