Adam Zivo: No, Trudeau did not make Canada richer

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Now that Prime Minister Justin Trudeau’s political career is coming to an end, some of his fans are romanticizing his economic track record. Yet it is indisputable that, under his leadership, the economy sputtered and Canadians, robbed of a decade of growth, were left relatively poorer than their global peers.

Perhaps the best example of this historical revisionism can be found in a fawning column published in the Toronto Star just hours after Trudeau’s resignation. Penned by the paper’s business columnist, David Olive, the article claimed that “Trudeau’s successors will be hard-pressed to improve on his economic track record” as there’s “no arguing Canadians became wealthier while he was in power.”

To substantiate his argument, which grossly exaggerated Canada’s post-2015 economic performance, it was claimed that Trudeau grew the economy by 41 per cent throughout his time in office, while his Conservative predecessor, Stephen Harper, who governed for roughly the same length, saw only 18 per cent growth.

These figures are useless, though, because they aren’t adjusted for inflation or population growth —?and addressing these factors is essential to credible economic analysis.

If you ignore inflation, Canada’s GDP has indeed grown by roughly 41 per cent since 2015 until now — ?from US$1.56 trillion (C$2.24 trillion) to US$2.33 trillion, according to the International Monetary Fund. But that isn’t actually illuminating, because the cumulative inflation rate of the U.S. dollar, which the IMF uses for its analysis, over that period was 33.1 per cent, so, obviously, much of this increase was simply inflation disguised as growth. This problem exists if you measure GDP using Canadian dollars, too.

To filter out the effects of inflation, Statistics Canada offers “real” GDP data where all figures are adjusted to 2017 Canadian dollars (there is nothing special about 2017; it’s just an arbitrary benchmark). This data suggests that Canada’s economy actually grew by 24.4 per cent under Harper and 21.4 per cent under Trudeau — so apparently Harper was the better economic steward.

The gap between the two Prime Ministers grows starker once the effects of immigration are accounted for.

GDP can be boosted by increasing a country’s population — more workers usually means more economic activity, after all. But this doesn’t necessarily mean that everyone, on average, gets richer. If you import a large number of workers, but everyone’s income stagnates or slightly decreases, that can still boost total GDP and conceal a sputtering economy.

This appears to be precisely what’s happening in Canada today, where growth has, in recent years, been primarily driven by unprecedented immigration.

If you want a more accurate sense of living standards, you need to look at real GDP per capita. Although Statistics Canada’s main dataset here currently ends at Q4 2023, the available numbers are dismal for Trudeau. During his tenure, this metric increased by only 0.8 per cent —? and fell far short of the growth achieved during the Harper era (4.5 per cent). Worse yet, Canada’s real GDP per capita is now precipitously declining. It fell by 4.4 per cent between Q2 2022 and Q4 2023, which is a rate comparable to the recession of the early 1990s, and appears to still be dropping.

In reality, economic growth during the Trudeau years was less than 20 per cent of what was achieved during the Harper era (+0.8 per cent real GDP per capita, versus +4.4 per cent), not twice as much, as claimed by Olive.

The Toronto Star’s business columnist also argued that Canadians’ median net worth “soared by about 66 per cent between 2016 and 2023,” but this claim is both inaccurate and misleading.

The relevant Statistics Canada dataset (which only covers 1999, 2012, 2016, 2019 and 2023) shows that median net worth actually grew by 44 per cent between 2016 and 2023. More importantly, its growth was an anemic 5.6 per cent between 2016 and 2019, which equals to an average of 1.86 per cent per annum, or half the growth rate seen under the Harper era. Then, between 2019 and 2023, it jumped to 36.4 per cent — ?or an average of 9.1 per cent per annum.

What happened between 2019 and 2023? COVID-19.

During the pandemic, the net worth of North American households surged due to skyrocketing home and stock prices, along with massive government stimulus and decreased consumer spending. In the United States, the net worth of a typical household increased by 37 per cent between 2019 and 2022.

Statistics Canada, meanwhile, estimated that, between 2020 and 2021, Canadian households increased their annual saving rate from $1,704 to $13,105 — a 769 per cent spike that, while short lived, was nonetheless impactful.

It is misleading to present these increases, which were driven by ballooning home prices and debt-fuelled stimulus, as evidence of a strong economy or admirable fiscal governance on the part of Trudeau.

Despite its many flaws, the Toronto Star’s op-ed has been widely shared by Liberals, including Immigration Minister Marc Miller, which suggests that senior figures within the party may have a weak grasp of basic economics.

Canada is going through a rough time right now. A lost decade, combined with eroding living standards, has been painful for many Canadians. Our American neighbours have become far richer than us since 2015, which may elicit entirely justifiable frustration and envy. Promoting decontextualized data will not change this.

National Post