Foundations of Canada's Prosperity Showing Cracks: Study

OTTAWA, October 30, 2018 – A report released today by the International Institute for Sustainable Development (IISD) suggests the concerns of Canadians about their future financial well-being are well-placed.

The report, Comprehensive Wealth in Canada 2018 - Measuring What Matters in the Long Run, provides the most complete analysis of wealth undertaken in Canada and one of the only such analyses undertaken for any country. The authors believe the government should place less emphasis on short-term indicators, such as GDP, and pay greater attention to comprehensive wealth when crafting policy and measuring progress.

“The foundation of Canada’s robust GDP growth since the 1980s – its comprehensive wealth – has developed much more slowly and is showing real signs of fragility,” says Scott Vaughan, President and CEO of IISD. “Once you peel back GDP to look at its underlying factors, big red flags start waving on how sustainable our economic results are.”

Comprehensive Wealth in Canada 2018  looks at the five capital stocks assets that make up Canada’s wealth portfolio:

• produced capital is made up of buildings, machinery and infrastructure
• natural capital includes the forests, minerals, fossil fuels and other natural assets
• human capital is the value of the skills and knowledge bound up in the workforce
• financial capital includes stocks, bonds, bank deposits and other financial assets
• social capital measures the degree of civic engagement and cooperation in society

“Since 1980, Canada’s GDP grew more than five times faster than the wealth foundation on which it rests. That’s not sustainable,” says Robert Smith, the report’s lead author. “We need to measure both - GDP and comprehensive wealth - to know where the country is headed. Right now, decision-making scales are tipped in favour of short-term thinking.”

“If the government adopts comprehensive wealth as a new lens to measure progress, Canada will lead the world in complete reporting and planning,” says Vaughan. “Statistics Canada already reports many elements of comprehensive wealth. It would be relatively easy for them to finish the job and give government - and Canadians - the information needed to act on their concerns.”

Interactive Highlights Page
Full Report (PDF)
English Highlights (PDF)
French Highlights (PDF)

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Note for editors

Our analysis points to areas of concern in Canada’s comprehensive wealth portfolio, each of which is a threat to long-term prosperity and well-being.

• The value of Canada’s comprehensive wealth portfolio grew very slowly over the study period, rising from $647,000 per capita[1] in 1980 to just $701,000 in 2015, an annual average growth rate of 0.23 per cent. In contrast, GDP grew at an annual average rate of 1.31 per cent over the same period. According to the UN, Canada’s comprehensive wealth performance has been the worst among G7 countries in recent decades.
• Canadian households have taken on unprecedented levels of debt since 1980, shifting their investments toward housing and away from financial assets, inflating house prices and leaving the rest of the economy reliant on foreign lenders for nearly three quarters of investment flows after 2012. The last time the Canadian economy relied on foreign sources for such a large share of investment was in the mid-1960s.
• An 86 per cent drop in the value of Canada’s most valuable natural asset: the oil sands
• Investment in produced capital has become increasingly concentrated in just two areas: housing and oil and gas extraction infrastructure. By 2015, 25 per cent of all business-sector produced capital was invested in oil and gas extraction assets – up from 9 per cent in 1980.
• Zero growth in human capital since 1980 despite an innovative global economy
• Substantial depletion of market natural capital like minerals and fossil fuels
• Growing encroachment of human development on Canada’s ecosystems
• Weak investment in financial assets
• Climate change has emerged as a major threat to Canada’s comprehensive wealth portfolio. Damages caused by flooding, wildfires and tornadoes are all on the rise.

Note: All figures in this report are quoted in real (that is, inflation-adjusted) per capita terms using chained 2007 dollars as the unit of measure unless otherwise specified.