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Canada\u2019s dismal productivity<\/a> that has significantly lagged other OECD countries<\/a> over the past few decades is a common complaint. However, fixing it won\u2019t come cheap, says a leading economist. <\/p>\n Charles St-Arnaud, a former strategist at the Bank of Canada<\/a> , says the main culprit for this underperformance has been a lack of investment in the economy. Remedying that will take an outlay he describes as \u201cstaggering.\u201d <\/p>\n Decades of underinvestment have resulted in Canada\u2019s stock of capital per worker (buildings, machinery and intellectual property used in production) falling severely behind its advanced nation peers, said St-Arnaud, who is now chief economist at Servus Credit Union. <\/p>\n How bad is it? Here are a few sobering statistics: <\/p>\n To catch up to the productivity level of these nations, Canada\u2019s stock of capital needs to grow by up to 5.4 per cent per year over the next decade which would require an investment of $7.6 trillion. <\/p>\n Closing half that gap would require Canada\u2019s capital stock per worker to grow by up to 3.5 per cent annually, an investment of up to $4.5 trillion. <\/p>\n Just to prevent the gap between Canada and its peers from widening would take an investment of up to $2.2 trillion. <\/p>\n \u201cPutting these numbers in context, the economy requires about $1 trillion in investment per year, the equivalent of about 30 per cent of GDP, over the next 10 years just to ensure we do not see further decline in competitiveness relative to the leaders in the OECD,\u201d said St-Arnaud. <\/p>\n Doing nothing doesn\u2019t seem an option, because if Canada\u2019s pace of capital investment doesn\u2019t pick up, the gap between it and its OECD peers will widen to over 60 per cent in 10 years. <\/p>\n The elephant in the room is how to pay for it. <\/p>\n St-Arnaud\u2019s report also considers the costs of fixing Canada\u2019s housing affordability crisis<\/a> which over the next 10 years could take an extra $1.7 trillion above and beyond what would normally be spent on home construction. Add the two \u201cgenerational challenges\u201d together and the total nears $9 trillion. <\/p>\n Most of the heavy lifting would fall to foreign investors. <\/p>\n However, St-Arnaud warns that relying on money from abroad runs the risk of Canada becoming even more of an \u201cextractive\u201d economy where profits flow out of the country and are not invested domestically. Attracting capital may also require higher interest rates, which brings its own set of problems. <\/p>\n Policy makers can help with incentives to direct more domestic savings from pension funds, asset managers and households into Canadian projects, he said. The financial system could also be adjusted to channel more lending toward productive business investment rather than household borrowing. <\/p>\n \u201cWhat is clear is that there is no cheap or easy path out of Canada\u2019s current predicament. The country\u2019s ambitions for housing affordability and competitiveness are within reach, but only with a scale of investment, saving, and structural adjustment that Canada has not mustered in decades,\u201d said St-Arnaud. <\/p>\n \u201cFalling short of that ambition will mean accepting that the country will keep falling further behind.\u201d <\/p>\n Sign up here<\/a> to get Posthaste delivered straight to your inbox.<\/strong><\/em> <\/p>\n The drought that has wreaked havoc on Europe with the worst wildfires in living memory is also disrupting supply chains, writes National Bank of Canada economist Jocelyn Paquet. <\/p>\n The lack of rainfall and high temperatures this summer have \u201ceffectively dried up\u201d the Rhine river, through which about 7,000 merchant ships normally pass each day. <\/p>\n As Paquet\u2019s chart shows, the water level at the Kaub chokepoint in the river fell to 28 centimetres this week, the lowest ever recorded at this time of year. <\/p>\n This has forced ships to either limit how much they carry or halt operations through the waterway altogether, pushing the price of barge transport to a historic high. <\/p>\n It doesn\u2019t help that the barges run on diesel, the price of which has soared during the Iran war. <\/p>\n With the current bull market now into its fourth year, many investors are wondering when the party will end. They are trapped between the \u201crock\u201d of FOMO (fear of missing out) and the \u201chard place\u201d of FOL (fear of losses). Investing columnist Noah Solomon looks at the 13 bear markets since the postwar era to see how they compare to today. Read more<\/a> <\/p>\n <\/span> Want to learn more about mortgages? Mortgage strategist Robert McLister\u2019s Financial Post column <\/a> can help navigate the complex sector, from the latest trends to financing opportunities you won\u2019t want to miss. Plus check his mortgage rate page<\/a> for Canada\u2019s lowest national mortgage rates, updated daily. <\/p>\n Visit the Financial Post\u2019s YouTube channel<\/a> for interviews with Canada\u2019s leading experts in business, economics, housing, the energy sector and more. <\/p>\n Today\u2019s Posthaste was written by Pamela Heaven<\/a> with additional reporting from Financial Post staff and Bloomberg.<\/em> <\/p>\n Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com<\/a> . <\/p>\n\n
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Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country\u2019s most important sectors. Sign up here.<\/a> <\/p>\n
\nAre you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at <\/span>wealth@postmedia.com<\/span><\/a> with your contact info and the gist of your problem and we\u2019ll find some experts to help you out while writing a Family Finance story about it (we\u2019ll keep your name out of it, of course).<\/span><\/div>\n
\nMcLister on mortgages<\/h2>\n
\nFinancial Post on YouTube<\/h2>\n
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