The Canada we know was built on the presumption of rising economic output over time. That faith has been factored into the way we live, from the social services and entitlements that are part of the furniture of our democracy to our expectations of greater opportunity for every generation that follows. | What happens when the growth that sustains those programs and values subsides? In the following pages we ask not just whether we are fated to live with slower growth, but how we might adjust to living that way and, if we reassess how we define our sense of well-being, whether that shift could be a blessing.

Vivre en mode de faible croissance

Tortoise Photos: ISTOCK LIVING WITH SLOWER GROWTHxxx

critical balance sheets and are now in a David Emerson long, painful healing process. While there are plenty of explan- ations for how we got into this mess Government must regain a sense — regulatory failures, greedy bankers, of caring for the next generation ill-managed fiscal stimulus, real estate bubbles, fiscal mismanagement, monet- ary mismanagement and more — there David Emerson, former minister of industry in the is another common thread. Govern- government and later minister of international trade and ments have largely abandoned the long minister of foreign affairs in the government, term. The imperative for government to is a corporate director and public policy adviser. bridge the interests of generations has all but disappeared, aggravated by the com- plex, interconnected, high-speed global- ized system we are now part of. n life and societal affairs, “cumula- long before the cumulative debt can Technology has liberated informa- Itive limits” can come into play. An no longer be supported, economically tion to the point where much of the ecosystem or a fishery, for example, or mathematically. world’s knowledge base is readily, if not can tolerate disruption in small doses, The notion of slower growth as a instantly, available across most of the but persistent, cumulative disruption “new normal” seems to be one such earth’s surface. People, countries, econ- can do damage that is hard or im- case. We in the mature, developed omies, geopolitical power and many possible to reverse. Similarly, a given world are reaping what we’ve sown. of the institutions of civilized societies revenue base will only support ex- We’ve ignored our intergeneration- are going through change at breakneck penditure in excess of revenue for so al stewardship obligations, destroyed speed on a massive scale. Nothing is

Graduations and test scores are up >>

EDUCATION

Education measures the GDP literacy and skill levels of the population, including the ability of children and adults to function in various societal contexts and to plan for and adapt to future situations.

Source: Canadian Index of Wellbeing, University of Waterloo EDUCATION (www.ciw.ca).

CIW

21 1994OPTIONS POLITIQUES POLICY OPTIONS2010 21 MARS 2013 MARCH 2013 

untouched. Nothing is standing still. mind in government, are shorter than We are hopelessly unable to predict ever. Short-term political calculations with any precision what lies ahead. crowd out long-term considerations. Businesses are seeing the new re- The long term is the next election. ality. They are seeing game-changing We see national and subnational competitive pressures, and responding. governments accumulating debt for They are embracing new approaches to services consumed today, often ration- management of global supply chains. alized as stimulus spending. But the They are taking new approaches to high- bill will inevitably be passed to future performance management through generations that already face serious teams organized for agility and adaptabil- demographic challenges when it comes ity. Battle-ready balance sheets with little to financing the public sector. or no debt and plenty of cash are becom- Globalization has recently given ing the norm. Businesses are doing all this resource-rich countries like Canada a to create the resilience necessary to deal tremendous edge in wealth creation, as with life-threatening shocks and “black developing countries seek out the in- swan” events that are less predictable and dustrial commodities and energy need- more sudden than ever before. ed to transform and modernize their Individuals are also reeling from bal- economies. Favourable terms of trade ance sheets that looked adequate in an have meant favourable cash inflows. earlier era but are woefully inadequate for In Canada the federal government today’s contingencies. Faced with mar- is in better fiscal shape than most ma- ket-imposed realities, people are taking ture national governments, but prov- steps to repair personal balance sheets, incial finances are in terrible shape. adjust debt levels, modify education deci- Witness the situation in , our sions or change retirement plans. largest province. The big worry is government. Effect- Even provinces with a rich bounty ive government is more important than of natural resources are failing future ever in a fast-moving, interconnected generations as natural resource assets global economy. But multilateral, rules- are monetized to pay for today’s public based arrangements are not keeping up services. ’s current consumption with the pace of change. And interven- of public services, for example, is 20 to tionist government in so-called develop- 30 percent paid for with nonrenewable ing economies, like China, is injecting a resource revenues (energy). Meanwhile, new distortion to the global markets in the current generation enjoys the low- which we compete. est tax levels and the highest public ser- Mature, democratic economies have vice levels in the country. Photo: istock been slow to adapt. More than ever we The opportunity for the benefits to need trade and investment frameworks, be shared with future generations, who critical infrastructure, education and also have a claim on those resources, training initiatives and technology and appears to have been squandered. procurement initiatives, all requiring Alberta is not alone. Resource rev- long lead times, planning horizons and enues are being consumed to cover cur- management capability that is rigorous rent expenses across the country and and agile. We also need government bal- are deeply embedded in permanent fed- ance sheets that are strong and battle eral-provincial transfer payments such ready. as equalization. Agreements to allow It is through such long-term anticipa- territories north of 60 to control their tory thinking that the interests of future resources are now being developed by generations become a core consideration. the Government of Canada. Let us Unfortunately, in a hyper-connect- hope an intergenerational imperative ed universe of social media swarms is embedded in those arrangements. and viral communications, the focus Yes, natural resources represent of government has never been more a vital, technologically advanced sec- immediate. News cycles, always top of tor, offering an abundance of jobs for

22 OPTIONS POLITIQUES MARS 2013 LIVING WITH SLOWER GROWTHxxx

Canadians. But resource-dependent fis- gations paid for by selling a publicly enjoying the government services we cal regimes are largely unsound, unstable owned asset and treating the proceeds don’t have to pay for. and in some cases even morally flawed. like ongoing revenue. It is too lenient to say we are liv- Why are Canadians so accepting of The knock on Canada’s resource de- ing in a fool’s paradise, because it sug- short-sighted approaches to public fi- pendence is less about so-called Dutch gests we will eventually have to pay nance? After all, economically extract- Disease and the dislocation caused by a the piper. More likely we are living in a able resources, like carbon fuels, are a higher exchange rate, and more about real paradise that we will force our kids depleting asset that once gone is gone. a deeper curse. Our resource bounty has to pay for. And an aging demographic They do not represent a permanent broken down the essential linkage be- will require them to pay even more to and stable source of revenue unless tween government spending and taxa- make up for the declining portion of the proceeds are invested in ways that tion that is at the heart of accountable the population that is working. yield a permanent flow of income over democracy. We have pretended the in- The new normal is simply the the generations. But many of us cling come statement and the balance sheet marketplace telling us it’s time to to the belief that resource revenues are are basically interchangeable. We sell clean up the mess. Perhaps the mar- like taxes and will therefore never go assets and call the proceeds income. kets don’t believe the kids can actual- away. So we allow our governments Being truly honest with ourselves, ly pay the bills we are poised to leave to take on permanent spending obli- the government is us, and we are rather behind. n

POLICY OPTIONS 23 MARCH 2013