The Truth About Canada (43 page)

Let’s look again, this time by doing a comparison of the 10 years from 1996 to 2005. During these years, Canada’s real GDP increased on average by 3.34 percent a year. During the same years, all OECD countries averaged a 2.73 percent increase, the Euro area 2.1 percent, and the average increase for the United States was 3.34 percent, exactly the same as Canada’s.
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So what can we expect in the future? Some very different forecasts are what we now have. The International Monetary Fund, in its September 2006 World Economic Outlook, said that 135 countries will have grown faster than Canada in 2007. On the other hand, the OECD suggests that Canada will have been in eighth largest GDP position in 2007, comparing the total GDP for each country.

In 2007, our total GDP was forecast to have been less than that of the United States, Japan, Germany, the United Kingdom, France, Italy, and China, all of course with larger populations than Canada.

This said, forecasts for 2020 by the research and advisory firm Economist Intelligence Unit suggest that Canada will be in 12th place in total GDP, behind, in order, China, the United States, India, Japan, Germany, the United Kingdom, France, Brazil, Russia, Italy, and South Korea, with Mexico and Spain essentially tied with Canada.
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For those who regard this as a terrible trend, note again that these are not per-capita rankings, and all the countries listed above have greater populations than Canada.

Of course, all of these forecasts were made before the disastrous U.S. sub-prime debacle hit the world’s economy.

38

STANDARD OF LIVING AND THE QUALITY OF LIFE

I
t’s bad enough when our politicians and journalists confuse GDP per capita with standard of living, but it’s even worse when they mix it up with quality of life, as they frequently do. Witness, for example, this remarkable statement by
Globe and Mail
columnist Neil Reynolds: “As befits the country that proclaimed it as a fundamental right, the U.S. is a front-runner in the world’s pursuit of happiness. Here you keep score by tracking per capita GDP.”
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What a truly bizarre statement! The 2007 OECD publication
Society at a Glance
measured the percentage of people who feel an above-average level of satisfaction with their lives. Of the 30 OECD countries, 14, including Canada, show a higher degree of satisfaction than the United States. Of those 14, 12 have a lower GDP per capita than the United States. In
The Economist
magazine’s 2007
Pocket World in Figures
, five of the top 25 cities classified as having the “highest quality of life” are Canadian. Not one U.S. city is among the top 25.

Measuring standard of living or quality of life without considering such things as the quality of social programs, distribution of income and wealth, leisure time, the environment, the amount of violence in society, and the purchasing power of a currency can be, and most frequently is, very misleading.

As noted American economist Paul Krugman has pointed out,

Frances’s GDP per person is below that of the United States, but much of that is because the French take more vacations, averaging about seven paid weeks per year, and work shorter hours and prefer to spend much more time with their families or in leisure activities. Yet French schools are good almost everywhere in the country, and there is guaranteed access to quality health care. Yes, it’s true that the French have lower per capita incomes than Americans, but who will argue that their quality of life is poorer or that Americans are happier? Or that Americans have superior family values?
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For seven years in a row, Canada was ranked first in the United Nations Human Development Index (1994 to 2000 inclusive). While this annual report is far from comprehensive, it does consider such important factors as health, longevity, literacy, and education enrolment, plus GDP per capita at purchasing power parity. Even though in the 2007/2008 edition Canada is ranked fourth, marginally behind Iceland, Norway, and Australia, our score has in fact risen, from 0.870 in 1975 to 0.961 — and we’re only 0.07 behind first-place Iceland, which has a score of 0.968.

In the life expectancy index we’re ranked fifth. In comparison, the United States is ranked 29th. (The Human Development Index covers 175 UN members plus three other countries.) Every year, Canada ranks well ahead of the United States in these and other quality-of-life comparisons, and ahead of most OECD countries. Despite all of this, if you read a Canadian newspaper, you can read almost every week about how Canada’s standard of living has been falling compared to that of the United States. And although they don’t often come out and say so in so many words, the implication is clear that our quality of life is also quickly falling behind.

If you believe the reports from many of our business economists and right-wing think tanks, Canada’s “standard of living” has fallen from almost 90 percent of the U.S. level to only just over 84 percent in 2005. But in fact it wasn’t at all our “standard of living” that was falling, and
compared to the United States it sure isn’t our quality of life. In fact, what they’re using as a comparison is Canada’s GDP per capita, which, as already indicated, does not accurately represent either per-capita standard of living or quality of life.

As we have already seen, there is considerable debate about Canada’s weak productivity compared to the United States. Some economists blame taxes and regulations, others (including me) blame, among other things, the failure of business to invest in new machinery and equipment and its failure to do adequate R&D.

There is also considerable debate about the impact of productivity on living standards. Heather Scoffield, following an interview with Andrew Sharpe of the Centre for the Study of Living Standards, put it this way in the
Globe and Mail:
“In the world of economics, happiness equals gross domestic product divided by population, but in the real world, happiness is harder to quantify. Countries such as Canada have a vague but broad concept of well-being that goes far beyond GDP per capita.”

Vague? I think not. It’s called quality of life. And it includes a long list of things which are normally considered necessary parts of “a good life,” a list that doesn’t include the widespread abject poverty, lack of health care, violence, and incarceration rates that are found in the United States. As Neil Brooks points out, Canada rates well ahead of the United States in terms of the economic security in the population. Moreover, as Brooks says, “Based on the most recent survey data … Canadians report they are among the happiest citizens in the industrialized countries.”

When’s the last time you heard a big-business-funded think tank economist referring to happiness? And for our Americanizers who want even greater “integration” into the United States, a November 2007 Angus Reid poll for
Maclean’s
showed that when Americans were asked if they would expect to have a better quality of life if they moved to Canada, a resounding 91 percent said yes.
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Commenting on yet another right-wing academic economic analysis that claims Americans are increasingly better off than Canadians,
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Neil Brooks was once again perceptive.

Aiming for U.S. per capita GDP appears to be totally misguided. On nearly every indicator that we looked at, the Americans were at or near the bottom. They have the highest rates of poverty, the greatest degree of insecurity and inequality. Their health outcomes on average are the worst. So are their education outcomes. They may have more obscenely rich people than we do, but that doesn’t make the typical family any better off.

At the end of the day we should be concerned about whether we are enjoying life and leisure.

The OECD elaborates on this use of GDP as an economic or social indicator:

GDP excludes a range of non-market activities that influence well-being, due frequently to practical concerns with measuring them, because their value is not easily defined in market terms. These include not only illegal activities and home activities like housework and do-it-yourself work, but also leisure, which is clearly of value to society.

GDP does not take account of externalities, such as pollution or environmental deterioration, nor of depletion of non-renewable resources.

GDP does not distinguish differences in the distribution of income. To most people, a huge increase in national income that goes exclusively to a tiny handful of very wealthy families will not increase general well-being as much as if it were more equitably distributed.
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As we’ve already seen, the average American works longer hours than the average Canadian, a remarkable total of almost two weeks a year more, according to one survey. But very long hours are judged to be obscene in most developed countries. When the Innovative Research Group asked
Canadians if they were willing to give up their vacation time, 72 percent said no, and 65 percent said they had no interest in working longer hours. Of course, a country that works shorter hours and has more holiday and leisure time will likely have a lower GDP per capita than a country with longer work hours, but few would suggest that working shorter hours implies a poorer quality of life, and most would think that it meant exactly the opposite.

While Canadians work far fewer hours in a year than Americans, they work more hours than they do in 15 other OECD countries, including Australia, Austria, Finland, the Netherlands, Portugal, Switzerland, Ireland, Sweden, Italy, Belgium, Germany, Denmark, Norway, the United Kingdom, and France. Yet as Andrew Sharpe and colleagues point out,

Workers in Nordic countries have been able to produce goods and services per capita that slightly exceed the value of the goods and services per capita produced by workers in Anglo-American countries, yet this seriously understates how much better off they are since they are able to produce these goods and services while working over 200 hours less a year. (On average American workers work 274 more hours a year than workers in Nordic countries.)
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Do Canadian workers work too few hours? Buzz Hargrove, president of the Canadian Auto Workers, also points out that while Canadian workers work shorter hours than Americans, they work longer hours than Europeans, have fewer vacations, put in more overtime, and generally retire later.

The French take, on average, more than 40 days of vacation a year. The Germans take 28 days, the British 23, while Canadians average 19 days a year. (See Note 10 for legally required paid leave.)

All in all, among OECD countries, Canada is almost exactly in the middle in hours worked, with the 14th highest average hours in a year. In 17 OECD countries, the average worker works fewer hours than the
average American worker.
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This said, from 2000 to 2005, while Canadian workers actually increased their hours by about 1.5 percent, all the following countries, which already had low rates, saw a further drop in hours worked: Sweden, Denmark, Norway, France, Switzerland, Austria, and Germany.

How many hours a week do Canadians work? From 1982 to 2002, the actual hours worked per week (average of all jobs) saw a high of 35.66 in 1989 and a low of 33.93 in 1992. In 2005 it was an average of 33.4 hours.
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The gap between hours worked in Canada and the United States has been narrowing. By 2005, hours worked per capita in Canada stood at 94.7 percent of the U.S. level, after being at only 88 percent from 1994 to 1999.
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Another factor worth considering (and discussed briefly in the chapter on distribution of income) is the fact that while Americans have been working longer hours, their median income had fallen for six years in a row up to 2005. In 2000, median U.S. household income was $49,133. Six years later, it was down to $48,201.

Economist Jim Stanford of the Canadian Auto Workers sums it up well. Even though the average French worker puts in fewer weeks in a year than the average American worker,

for every hour spent working, the French produce slightly more value-added than the Americans. In fact, most of Europe has higher productivity than the United States.

So, the French work less, but they work more productively.

As a result, they have high incomes, yet spend a lot more time protesting, dining out, and making love (not necessarily in that order).

Now that’s what I call efficient.

There’s a natural tendency to confuse how well off you are with how much “stuff” you have. Stuff is visible, and has a price tag.

Time, on the other hand, is invisible and apparently free.

Every ranking of countries, according to GDP produced per capita, falls into this trap, by implicitly assuming that
the value of time is zero. (In fact, the older I get, the more I realize time is priceless, not worthless.) …

If you work longer, hence boosting your GDP per capita, then by definition you are more prosperous. The most prosperous nation of all would be the one that can find a way to keep people working 24 hours a day, seven days a week.…

In other words, most of the much-discussed “prosperity” gap between Canada and the U.S. is due simply to the fact that employed Americans work longer. That’s not my idea of “prosperity.”
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Now, if we could only get the people who own this country to invest more of their record profits in new technology, new machinery and equipment, and in much more R&D, we could enjoy being even more like the Europeans and less like the Americans.