At the corner of a Calgary office, across a desk cluttered with spreadsheets and coffee cups, Charles St-Arnaud draws the outlines of a problem Canada has been staring at for years — a productivity gap so wide it would take $7.6 trillion to plug. The numbers are not just cold figures. They speak to decades of underinvestment in machinery, buildings, and intellectual capital, with the economy now falling far behind its peers in the Organization for Economic Co-operation and Development.
The scale of the shortfall
Canada’s capital per worker — the stock of buildings, equipment, and knowledge used to make goods and services — trails behind the average of the 10 most productive OECD countries by 50 percent. Switzerland, one of those top performers, has 118 percent more capital per worker than Canada. Since the 2015 oil bust, St-Arnaud notes, Canada’s capital per worker has barely ticked up at 0.2 percent annually — far below the 1.2 percent average in the more competitive nations. The result is a 37 percent gap in productivity and a 31 percent lower GDP per capita on average.
St-Arnaud, now chief economist at Servus Credit Union and previously a strategist at the Bank of Canada, warns that closing the full gap would require annual growth of 5.4 percent in Canada’s capital stock over the next decade. That translates into a decade-long investment of $7.6 trillion. Even catching up halfway would take $4.5 trillion in new capital. Just to stop the gap from widening further would need $2.2 trillion.
The cost of doing nothing
The math is stark: if Canada doesn’t significantly raise its capital investment, the gap in productivity could expand to 60 percent in a decade. That’s not just an economic setback — it’s a structural collapse in competitiveness. St-Arnaud calls it a “generational challenge,” and it’s one that touches beyond just factories and machines. He also points to the separate but equally urgent issue of housing, where a 10-year effort to improve affordability could alone take $1.7 trillion in extra investment. Combined, the two challenges approach a staggering $9 trillion.
The solution, however, is not obvious. Most of the investment would likely come from foreign capital, but St-Arnaud cautions that could lead to Canada becoming even more of an “extractive” economy — where profits flow out rather than being reinvested. Attracting foreign investment may also require higher interest rates, which could further cool the housing and consumer sectors.
A call for structural change
St-Arnaud argues that policy makers have a role in shifting domestic capital toward long-term projects. He suggests reforms to pension fund and asset management strategies to steer savings toward infrastructure and industry. The financial system itself, he says, could be restructured to channel more lending into business investment rather than consumer debt. Without these changes, he says Canada risks stagnation.
“The country’s ambitions for housing affordability and competitiveness are within reach,” he wrote in a report, “but only with a scale of investment, saving, and structural adjustment that Canada has not mustered in decades.” Falling short, he adds, will not be a failure of potential, but of action.