Canada has a population of about 40 million people, about the same number of people living in California. The nation may do better than expected in pop and rap, but compared to its enormous potential, it does poorly on the economic front.
It has the longest shoreline and is the second-largest country in the world by land area. With the vast Pacific and Atlantic oceans on either side, it has tremendous trading benefits. To the north, it has access to the untapped Arctic. It exports more energy than it imports, has the third-largest proven oil reserves, and produces the fifth-most natural gas. It also has large deposits of minerals vital for the shift to green energy. Plus, it’s right next to the biggest economy in the world.
Taking into account changes in buying power, its economy is the 15th largest in the world, after countries like Turkey, Italy, and Mexico. As of 2060, the OECD (Organisation for Economic Co-operation and Development) thinks that Canada will have the slowest GDP growth among all the rich countries.
In the early 1900s, industrialisation sped up and settlements grew, as money from the United States and the United Kingdom poured in. Wilfrid Laurier, who was prime minister at the time, said in 1904 that “the 20th century shall be the century of Canada and Canadian growth.”
Since the Second World War, Laurier’s prediction hasn’t come true. PwC sees Canada’s economic ranking dropping to 22nd in the coming days.
Low productivity
A Canadian worker can only make a little more than 70% of what an American can in an hour. Based on figures from 2022, this is less than the euro area and even the UK. Many people thought that the resource-rich economy would do better as globalisation sped up, but since 2000, its relative labour output has gone down.
Stephen Brown, deputy chief North America economist at Capital Economics, says, “Two of the economy’s previous main drivers of growth—natural resources and manufacturing—have struggled to grow in recent years. This is because of a combination of stricter regulations and more competition from abroad.”
The Centre for Productivity and Prosperity at HEC Montreal’s researchers say that Canadian business is not strong enough to fight on a global level. The country’s huge size, mountainous terrain, and different provincial laws may make it harder for businesses to compete, spend, and come up with new ideas. The Business Council of Alberta says that these hurdles to trade are the same as putting a 6.9% tariff on goods. On top of that, protectionist policies have often helped Canadian businesses.
An American vassal state
Canada has four relevant borders, not only the American one, as Canadian decision-makers have assumed for decades. America to the south, China to the west, Russia to the north, and Europe to the east are “ACRE” borders.
Canada will live or die by this four-point game, stretched and pulled by its large nuclear neighbours or pressed or crushed by their power plays. Based on this four-point game, we can calculate 15 vectors of strategic pressures, pulls, and complexity to handle in this century: A, C, R, E, AC, AR, AE, CR, CE, RE, ACR, ARE, ACE, CRE, and ACRE.
Canada can either strengthen its American ties or become a major power by surviving difficult geopolitical circumstances.
Canada’s strategic imagination is familiar with the America (A) and Europe (E) vectors, but the China (C) and Russia (R) vectors are almost unknown. Canada has rarely had a powerful, smart, and stable China.
China stabilised strategically, economically, and intellectually in the century and a half after the 19th-century Opium Wars, which ended just before Confederation. This is almost precisely the same as Canada’s 153 years of existence. Thus, in its decision-making mind and the public consciousness, Canada still views China as systemically backward, ethically primitive, and geographically distant.
Such a perception is truly a terrible mistake. China is incredibly advanced systemically and far closer to Canada than people believe.
Russia is “new” to Canada’s strategic psychology. Due to the increasing melting of the Arctic, it lies directly opposite Canada’s northern flank. This northern Russian border, like the western Chinese (or Asian) boundary, is unfamiliar to a country that has reduced most of its foreign policy to a theory of the American border.
Canada may voluntarily become an American vassal. If it takes this path, it will consolidate the current trajectory, in which the strategic, economic, cultural-intellectual, and political systems and frameworks are intertwined, dependant, identified (often “as one”) with, or extensions of American systems and frameworks.
Canada outsources most strategic thinking, intelligence, and material power-brokering to the US. The New NAFTA (USMCA) explicitly vassalised Ottawa in law to Washington: Canada may only have mature economic relations, including free trade arrangements, with China, America’s main competitor, with US consent.
The spat with China over Huawei CEO Meng Wanzhou’s detention highlighted the Canadian vassalisation. The Americans wanted to arrest Meng in Canada. Canadians consented, and naturally, extradition occurred. China pressured Canada with penalties and counter-arrests to free Meng. Ottawa, caught in the “AC” vector (America-China), immediately rushed to Washington for relief from Chinese pressure.
Canada’s strategic perplexity in the Meng scenario derives from the incomprehension of our strategic circumstances: they use a basic and antiquated mental map in which only the “A” vector matters. With the “C” vector, the nation doubled down on the one game they knew, i.e., listening to American foreign policy. Adding any of the other pressure-pull combinations would do the same for now. Canada has numerous experts on America, but few world-class experts on China and Russia, and none on the China-Russia vector, China-America, China-Europe, America-Russia, etc.
Canadian vassal status in an overly complicated external world may provide adequate strategic and economic protections and guarantees for Canada, Canadian interests, and the Canadian people, including against potential adversarial pressures and pulls from other great powers at its borders.
In the coming years and decades, America may not want to or be able to protect its neighbour in many or all instances in our four-point or 15-combination strategic game.
America may not provide sensible or outstanding intelligence, analytics, or political or policy lessons. Control of the world’s largest media channels, including the internet and social media, does not imply quality or authority.
Canada’s vassalisation could have negative effects on the nation. They are the remora of a shark that thinks it will defend them but whose strategic choices and preferences, degenerate or inspired, it always accentuates. If these preferences are bad, Canadians are stuck with their strategic bed and no other options. They are at Washington’s mercy if they require overt defence against adverse winds.
A lot depends on the population. One of the fewest people per square mile lives in Canada. Its birth rate has been dropping rapidly, and it doesn’t have enough people to make the most of its economic potential. Canada has great health, education, and life happiness scores. Its biggest cities are thought to be some of the best places to live in the world.
People want to live in Canada, and the country is open to immigration. This means that Canada can fix its population issues. It had its fastest population growth in more than 60 years in 2022, as the government tried to bring in new people. The temperature change is already making more people want to use its huge copper and nickel resources. Northern Canada will be able to trade more now that the Arctic ice shelf is shrinking.
It’s not enough for a country to move up the GDP rankings. And it’s clear that people all over the world, not just in poor countries, want to live like Canadians do. But as long as efficiency trends stay the same, living standards will go down and Canada’s huge economic potential will stay hidden.
Canada’s restrictive foreign policy also hinders it from pursuing lucrative markets without US approval. That would be bad for the world economy and the thousands of people who are going there to find better lives.