The Canada We Want in 2020

A Strategic Policy Roadmap for the Federal Government

September 2011

About Canada 2020 Canada's Progressive Centre

Canada 2020 is a non-partisan, progressive centre working to create an environment of social and economic prosperity for Canada and all Canadians.

Canada We Want in 2020

Introduction As we look forward to 2020, the world around us is changing rapidly. The US is not as dominant an economy as it once was and many European countries are facing major economic and fiscal challenges; other economies, especially in Asia, are rising rapidly creating a truly multi-polar world. Growth is driven by technologies that are less and less `contained by borders and the need to define and implement a low-carbon future is becoming ever more pressing. For a country such as Canada, there are many opportunities, but also fundamental and inter-related challenges. If these challenges are not addressed in a strategic and coherent way including building a societal consensus to address them we risk falling behind competitor countries in the advanced and emerging worlds. This would make Canada less of a country than it has been in the past. Both the robustness and competitiveness of our economy and the degree to which our society is fair and equitable, are at stake. The key challenges that Canada faces are: an aging society, with a much greater ratio of retired to employed citizens, resulting in stagnant labour-force growth and significantly higher healthcare and pension costs; the rise of Asian economies, especially China and India, which poses structural challenges to our competitiveness (as well as opening new opportunities); weak productivity growth which threatens our standard of living (and could cost each Canadian up to $30,000 in foregone income over the next decade); increasingly sharp income polarisation; and lack of preparedness for and investment in the low-carbon economy.

These challenges have been recognised for many years, yet they remain largely unaddressed at a strategic level. As a result, Canada has been drifting instead of readying itself to respond effectively and to capitalise proactively on emerging opportunities. Many elements of Canadian society the business community, governments at all levels, educational institutions, and Canadian citizens generally must work to address these challenges. It is, nevertheless, our contention that the federal government has a special leadership responsibility: the federal government is the only entity capable of addressing these pan-Canadian challenges in a comprehensive and strategic way to end the drift and break Canada out of the current paradigm. Indeed, the reason why we have a federal government is to respond to challenges such as these. Fundamentally, this is an issue of national leadership. Not only must Ottawa develop appropriate policy to address the challenges, it must also exercise political leadership to forge a consensus among Canadians for change.

Canada We Want in 2020

Our approach Canada 2020 has established five working groups to examine these most pressing issues. Our aim is to raise the level of public debate and understanding of the challenges and opportunities we face and to put forward strategies to address them. The bold ideas we will propose will help break the cycle of incrementalism and drift and, we hope, underpin a new consensus around the appropriate role for the federal government. 1. Increasing Innovation and Productivity to Pay for the Canada We Want Canadas innovation and productivity performance both of which are central to economic growth, competitiveness and our standard of living have been stagnant for years. This is particularly problematic in light of Canadas low levels of labour-force growth and the competitive challenges from emerging economies. Federal and provincial governments have been working at the margins on the innovation and productivity problem for well over a decade, yet Canadas performance remains very weak by both international and Canadian historical standards. Fixing this problem is a pressing national priority. Falling further behind is not an option if we wish to maintain our economic standing and our ability to sustain the public services that Canadians expect and need. 2. Rising to Meet the Asia Challenge For years Canada has been missing the boat with respect to penetrating markets in Asia especially China and India the fastest growing major economies in the world. At the same time, Canada has failed to attract significant inward investment from either China or India. In tandem with improving productivity growth, meeting the Asia challenge is central to Canadas prosperity and economic future. Canada needs an Asian Economic Strategy to capitalise on market opportunities and to diversify our economy away from overdependence on the United States market. 3. Squaring the Carbon Circle Both advanced and emerging markets are moving inexorably towards a low-carbon future. Yet Canada has no strategy to reduce carbon consumption, or to responsiblymanage fossil fuel production. Canadas carbon problem is quite unique. Its parameters are set by two main axes: As a country, we are the second highest per capita carbon consumers among the advanced economies (Australia is first) and we have shown no willingness to lead or even follow the quest to a low-carbon future. At the same time, we are becoming one of the leading fossil fuel producers/ exporters in the world; our future economic welfare is closely linked to oil sands development.

We need a strategy to address these highly complex issues and to capture the benefits of our resource endowments, not just in the short-term, but also for future generations.

Canada We Want in 2020

4.

Reducing Income Disparities and Polarisation

Poverty remains a significant and growing problem in Canada. Income polarisation is also increasing steadily, to a degree that could threaten social cohesion. According to Statistics Canada from 1980 to 2005, the income of the richest one-fifth of Canadians grew 16.4 per cent while the poorest fifth saw their earnings decline by 20.6 per cent. Since technological advances and globalisation both tend to increase inequalities as returns to unskilled labour decline, this is a problem that will not go away in the absence of significant policy action. The federal system of income support has not been fundamentally changed in a quarter century: it is not designed for a globalised economy driven by technological change. It is time to consider reform of federal income security programs to better meet the needs of the modern economy/labour market and Canadas demographic profile. 5. Securing our Health System for the Future Canadas universal healthcare system is putting enormous pressure on provincial and federal treasuries at a time of fiscal deficits. Healthcare costs are rising as a percentage of GDP due to our aging society and healthcare inflation. The current federal-provincial funding model is not effective as it is neither predictable nor sustainable in the long term. At the same time, Canadas healthcare system is in clear need of reform to ensure that it effectively meets the needs of all Canadians. Variations in coverage across the country, as well as very poor outcomes for aboriginal groups, are two key problems. Adapting the system to meet the needs of an aging population is a third. Although not primarily responsible for healthcare delivery, the federal government has a key leadership role to play in defining the healthcare system that will underpin Canadas strength in the next decades.

Canada We Want in 2020

How We Are Going About It As a non-partisan, not-for-profit, progressive centre created to provide policy options and ideas for Canadian decision makers and leaders, Canada 2020 is uniquely positioned to guide the process of developing bold new ideas and advancing the debate in these areas. Phase 1 The over-riding objective of this project is to raise the level of debate in Canada and to begin to lay the ground for the establishment of a new consensus on the role of the federal government. Canada 2020 has commissioned leading experts from the policy community (drawing in participants from business, academia and the non-governmental sector) to write shortpapers that are heavy on strategic policy options in the five areas. The authors remit is to propose policy ideas for the federal government that are transformational but also practical from an implementation perspective. These fifteen papers will be published in a single volume in late 2011. Phase 2 Building on the ideas generated in Phase 1, Canada 2020 will stimulate conversations in the five areas through a series of panel discussions, presentations and web-based exchanges. These events will take place throughout 2012 and will lead to the production of a final synthesis document, focussed on translating policy into action.

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Our Contributors: Increasing Innovation and Productivity to Pay for the Canada We Want Jim Stanford, Canadian Auto Workers Kevin Lynch, BMO Financial Group Lawson Hunter, Stikeman Elliot & Peter Nicholson

Rising to Meet the Asia Challenge Dominic Barton, McKinsey & Company Yuen Pau Woo, Asia Pacific Foundation of Canada Rana Sarkar, Canada India Business Council

Squaring the Carbon Circle Stewart Elgie, Sustainable Prosperity & University of Ottawa Ian Mallory, Pickworth LLP Lorraine Mitchelmore, Shell Canada

Reducing Income Disparities and Polarisation Mark Cameron, Research in Motion Andrew Sharpe, Centre for the Study of Living Standards Sherri Torjman and Ken Battle, Caledon Institute

Paying for the Healthcare we Want Dr. Phillipe Couillard, SECOR Group Francesca Grosso, Grosso McCarthy & Michael Decter, Lawrence Decter Investment Council, inc. Mark Stabile, University of Toronto

Project Coordinator Diana Carney diana@canada2020.ca 613-789-0000

Canada We Want in 2020

About Canada 2020 Canada's Progressive Centre Canada 2020 is a non-partisan, progressive centre working to create an environment of partisan, social and economic prosperity for Canada and all Canadians. Canada 2020 is supported Canadians. by:

and the many individual donors to the Canada 2020 Founders' Circle For more information visit www.canada2020.ca