Charles Sousa predicts that Ontario’s economy will grow at just above 2 per cent a year, on average, for the next 20 years. To put just how slow that is in context: that’s below the average for the previous 25 years – including the two huge recessions that took place during that period.
It’s also important to note that we’re growing at roughly the same pace as Canada, nation-wide (Ontario averages 2.1%, Canada, 2.2%). That’s just a hair slower than the US (which is projected to grow at 2.4% over the next 20 years), and a full percentage point below the global rate (3.1%).
Put simply, the global economy is slowing down.
The primary reason: an aging population. More people are getting older, and spending less. Less spending means slower growth. And while slow growth isn’t all bad, it does pose some real problems.
A slower economy means fewer jobs created. But we need faster, not slower job growth in Ontario to soak up Ontario’s 560,000 unemployed, 43% of whom are under 30.
A long-term slow growth economy could also mean less revenue for Ontario over next 20 years, just as spending on aging people and an aging infrastructure is expected to climb.
All this has the makings of heightened political tension, because there are really only three paths to choose from:
- don’t balance budgets (which means we borrow more);
- increase our revenues (collecting what we’re owed, or upping taxes and fees);
- offer fewer supports for people
None of these are very attractive solutions. So what could possibly be good about this situation? The optimist in me sees silver linings on these grey clouds.
An aging labour force will eventually lead to more opportunities for younger people, which could in turn become a wellspring for innovation. And as that population moves out of the workforce, wages will likely rise for younger workers.
Governments simply can’t pursue a low wage strategy indefinitely, as the market tightens. Ontario’s firms need people with more purchasing power — unless smaller firms are OK with losing market share to bigger, more aggressive price-chopping businesses.
Slow growth also increases pressure for innovation. Today’s era has many similarities to the period of the 1870s to 1890s — which was the first to be dubbed “The Great Depression”. It was also a time of innovation breakthroughs: cars, trains, the expansion of rail and trams; phones, telegraphs and radios.
Today, we’re again on the verge of all sorts of breakthroughs. Think about artificial intelligence, biomedical discoveries, new approaches to energy generation and use.
Permit me a small digression:
I recently bought a set of Empire Club of Canada speeches, going back to 1940s. They are the TED talks of yesteryear. And while their fragile bindings are chock full of speeches from the 1950s about private sector initiatives and investment, these businessmen and statesmen (and they are universally men) also speak with one voice about the power of, and need for, massive public investments in infrastructure, public transit, aerospace, and basic science. Their spirit stands in stark contrast with today’s “we can’t afford it” tonality. They are amazing vignettes of enterprise and entrepreneurialism from both public and private sectors, with a “Field of Dreams” mentality animating it all: if we build it, they will come….and we will all be the better for it.
The key lesson here? Governments shape the future and our economic growth by what they do and by what they don’t do, not just by getting out of the way of business. Today, the very least we need to do is increase, not shrink, government’s contribution to the economy by fixing and extending the infrastructure built in the 1950s and 1960s….or business won’t invest here.
So perhaps slow growth is a gift. It has ushered in historically unprecedented low interest rates. That creates a fantastic opportunity, and the perfect conditions to tackle our infrastructure deficit, human and physical. It’s a false economy to say we’re restraining government spending now. We should be hiring people before the wage push of aging labour markets begins in earnest, and when the price of borrowing money is as close to nothing as it’s ever been. Failing to act now only raises the sticker price of taking action when it is inevitably taken down the road.
Could slow growth also be a gift to those concerned about meeting climate change targets? Older people buy less stuff. If people buy less stuff, we make less stuff. Slow growth could provide the planet with a bit of breathing room by slowing down the production of green-house gas emissions and other forms of toxic pollution. That’s another way to inch towards making progress on reaching necessary Kyoto Targets, which are — literally — life-saving.
Slow growth is also the reason the private sector has lost its investment mojo, and is sitting on rising piles of cash, or as it is affectionately called by central bankers, “dead money”.
Maybe the government could become more of a major investor for a while, guiding the 21st century infrastructure towards reduced energy use, and new energy sources.
Business can’t succeed on a planet that fails.
In the past, an entrepreneurial state asked: what kind of future do we want, and how do we get there? Slow growth could nudge us towards those questions again.
Maybe, just maybe, slow growth could help us shape our future instead of accidentally drifting into it.
This post is an adaptation of Armine’s business column from April 3, 2014. Armine can be heard on CBC’s Metro Morning on Tuesdays and Thursdays. You can follow her on Twitter @ArmineYalnizyan.