During the last election much was made about Canada’s relatively good performance during the last recession. What was conveniently left out of the discussion by all political parties is just how dismal Canada’s macroeconomic performance has actually been over the last forty years including the last decade. Below are two graphs plotting Canada’s relative macroeconomic performance on three metrics: unemployment and inflation, the so-called Misery Index (MI), and productivity. First the MI (click for enlarged and clear image).
Over the forty years Canada has ranked either the worst or second worst of the seven countries plotted in the graph above. What is most interesting is that for the last two decades most of that dubious distinction has been earned via high unemployment rates as almost all the differences in the scores in the misery index are attributable to differences in unemployment rates as inflation rates clustered into a tight band between 0 and 3 percent. So top marks for price stability and low marks for employment creation. That should help to put a fine point on the topic of corporate tax cuts.
But OK you say so unemployment has been high price stability surely helped bolster Canada’s productivity. Nope. There the story goes from bad to pathetic. Canada has consistently trolled the bottom of the pack.
I guess Canadian policy makers and corporates can take solace in the fact that over the last decade Germany and the Netherlands were also pancaking in terms of productivity but as I will show in later post the other two can at least claim very healthy current account surpluses and in the case of Germany a nonetheless very strong manufacturing sector. As I will also illustrate in yet another post the bright side is that Canadian profits have been very healthy. This too will help to put a fine point on the subject of corporate tax cuts.