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It’s important to talk about this now, because it’s possible we won’t notice that we are being left behind until it’s too late.
Here’s why. GDP increased 0.7 per cent in November from October, Statistics Canada reported on Jan. 29. That was much better than most Bay Street economists were expecting. The second wave of COVID-19 infections is testing our resolve, but the economy had decent momentum at the end of 2020. GDP was only about 3.5 per cent less than its level last February.
That’s an impressive recovery, all things considered. It took two years to fill the hole left by the Great Recession. The COVID-19 collapse was brutal, but it could turn out to be relatively short.
If so, the housing evangelists will want a good deal of the credit. The real estate industry generated output of about $262 billion in November, little changed from the previous month, which was the most on record, according to data recorded back to 1997.
Finance, real estate’s enabler, generated output of almost $144 billion in November, also a record. Banking now accounts for about eight per cent of GDP, compared with six per cent at the end of 2008.
Bay Street has almost as much economic weight as the entire energy industry, which matters because those industries extract more wealth than they create. Both benefit from policy, and their place atop the national accounts will make it difficult, if not impossible, to undo those policies. They will continue to attract talent and spin money between themselves.
If that happens, Canada’s economy will become less and less competitive. Productive industries such as manufacturing will suffer, because they hoarded cash instead of spending it on technology that would make them nimbler and greener. Corporate, household and government debt will become a bigger burden, because the economy can’t generate enough revenue to keep pace with interest payments.
But at least we’ll have our houses.
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