Canada is far from a full house

The Globe and Mail (Atlantic Edition) - - FRONT PAGE -

The coun­try is vastly un­der­pop­u­lated, pos­ing a very real threat, Doug Saun­ders writes

In his new book, Max­i­mum Canada, Doug Saun­ders chron­i­cles the ways in which a ‘pop­u­la­tion deficit’ is ham­per­ing op­por­tu­nity and pos­ing a gen­uine threat to so­cial pro­grams, liv­able cities and a cleaner en­vi­ron­ment. As am­bi­tious as it sounds, a goal of 100 mil­lion Cana­di­ans may be worth aim­ing for, he writes, but we must start plan­ning now to get it right

If you’re stuck in traf­fic on Van­cou­ver’s Lions Gate Bridge, squeezed shoul­der-to-shoul­der on the King street­car in Toronto, or try­ing to find a free seat on a ter­rasse on Mon­treal’s Plateau any sum­mer evening, you might find it hard to be­lieve that Canada has a short­age of peo­ple.

Our pop­u­la­tion prob­lem be­comes tan­gi­ble only when you set out to do cer­tain things that re­quire an au­di­ence, a mar­ket, or the sup­port of an in­sti­tu­tion or medium that only a pop­u­lous coun­try can pro­vide. Then you dis­cover that there’s just not enough Canada.

If you’re an en­tre­pre­neur seek­ing ven­ture cap­i­tal, an ac­tivist fight­ing for bet­ter public ser­vices, or a pro­fes­sional search­ing for the best cre­den­tials, you have prob­a­bly, at some point, run up against the lim­its of Canada’s pop­u­la­tion, cur­rently sit­ting at about 35 mil­lion. Same if you’re an artist or writer look­ing for an au­di­ence big enough to pro­vide you with a liv­ing, a band-coun­cil leader hop­ing to make your com­mu­nity’s next gen­er­a­tion in­de­pen­dent and well-ed­u­cated, an online en­tre­pre­neur seek­ing Cana­dian clicks, a mayor hop­ing to fill your city with de­cent public tran­sit, or an en­vi­ron­men­tal­ist seek­ing a big shift to green tech­nol­ogy in en­ergy and trans­porta­tion.

For many in­di­vid­ual Cana­di­ans, the first vis­i­ble re­al­ity of un­der­pop­u­la­tion is the dis­cov­ery that you need to leave the coun­try to suc­ceed in your ca­reer, your ed­u­ca­tion or your craft. At least three mil­lion Cana­di­ans live abroad – al­most one in 10 of us. This shouldn’t be seen strictly as a net loss; even in a fully equipped coun­try, it’s ad­mirable to use the wider world to ex­pand your­self. The prob­lem, in Canada, is that there’s of­ten no other way: The au­di­ences, mar­kets, clus­ters of ex­per­tise are of­ten lo­cated some­where else, some­where with more peo­ple.

A decade and a half ago, I started look­ing into the core ques­tions of Cana­dian pop­u­la­tion. How did we end up with so few peo­ple? How does our low pop­u­la­tion den­sity af­fect our liveli­hood? And what is Canada’s ideal sus­tain­able pop­u­la­tion level? The re­sults of my re­search are pub­lished in my new book, Max­i­mum Canada.

It con­cludes that we are still strug­gling with a pop­u­la­tion deficit dat­ing from more than a cen­tury of failed trade, im­mi­gra­tion, pop­u­la­tion and eco­nomic poli­cies – be­gin­ning in the pre-Con­fed­er­a­tion decades – that drove peo­ple away from Canada.

In most of the decades from 1850 to 1950, a time when tens of mil­lions of am­bi­tious peo­ple flooded out of Europe and Asia for the New World, Canada ex­pe­ri­enced a net mi­gra­tory loss. By the end of the Sec­ond World War, Canada had at­tracted 6.7 mil­lion im­mi­grants, but had lost 6.3 mil­lion Cana­di­ans – gen­er­ally our more ed­u­cated and suc­cess­ful cit­i­zens – who em­i­grated to other coun­tries, mainly the United States.

The “min­i­miz­ing” pol­i­tics of Canada’s first cen­tury of Con­fed­er­a­tion – a mu­tu­ally re­in­forc­ing set of poli­cies that re­stricted North Amer­i­can trade, main­tained im­pe­rial re­source-econ­omy ties, lim­ited much im­mi­gra­tion be­yond the Bri­tish and the ru­ral, val­ued farm­ing over com­merce, treated In­dige­nous peo­ples as prob­lems rather than part­ners, and dis­cour­aged en­trepreneur­ship – worked to keep the coun­try’s pop­u­la­tion growth ex­tremely lim­ited. This was true even dur­ing the of­fi­cial im­mi­gra­tion drives of the 1870s and 1930s, both of which failed.

We are still strug­gling with the legacy of that past. It has left us with cities that sprawl rather than con­cen­trate, with In­dige­nous, fran­co­phone and mi­nor­ity pop­u­la­tions still re­cov­er­ing from more than a cen­tury of sub­ju­ga­tion, with poor rates of busi­ness cre­ation, with ma­jor com­pa­nies that de­pend on sub­si­dies rather than mar­kets – and with a level and den­sity of pop­u­la­tion inad­e­quate to create the mar­kets and in­sti­tu­tions this cen­tury will re­quire.

Only to­day, af­ter an­other half-cen­tury spent wrestling with those con­se­quences, does Canada have a na­tional, cross-par­ti­san con­sen­sus around a broadly ex­pan­sion­ist vi­sion for the fu­ture. We have reached the point where we can talk hon­estly about our need for more Cana­di­ans.

The chal­lenge now is how to talk about ad­dress­ing that need – be­cause it is not sim­ply a matter of adding more peo­ple.

A ques­tion of ca­pac­ity

On the most ba­sic level, pop­u­la­tion doesn’t matter. Hav­ing more peo­ple does not by it­self make a coun­try more suc­cess­ful.

Rather, the is­sue is one of ca­pac­ity. Do we have the right peo­ple, in the right num­bers, con­cen­trated closely enough to­gether in the right places, to do the things to­gether that we want and need to do? Given our huge ge­o­graphic ex­panse, our widely dis­persed com­mu­ni­ties and our wa­ver­ing de­pen­dence on larger, for­eign mar­kets, do we have a suf­fi­ciently high den­sity of tax­pay­ers, con­sumers, au­di­ences, in­ven­tors, spe­cial­ists, in­vestors, el­ders and heal­ers, en­trepreneurs, care­givers, schol­ars, ac­tivists and lead­ers to create the things we need to sus­tain our stan­dard of liv­ing through a po­ten­tially dif­fi­cult fu­ture?

There are sev­eral cru­cial ways to look at our pop­u­la­tion. We can look at it as a mar­ket – that is, as peo­ple who will con­sume the goods and ser­vices cre­ated by other peo­ple, al­low­ing their en­ter­prises to suc­ceed. As tax­pay­ers – peo­ple of work­ing age who can pro­vide a fis­cal base that will sup­port public in­sti­tu­tions and in­fra­struc­ture, in great enough num­bers to keep tax rates rea­son­able. As a labour force – peo­ple whose skills and strengths can be put to work, in suf­fi­cient num­bers to make en­ter­prises thrive. As an au­di­ence – peo­ple who con­sume and sup­port the in­for­ma­tion ser­vices, the cul­tural and me­dia in­sti­tu­tions and the online re­sources of the coun­try. As clus­ters of ex­per­tise – groups of skilled and ed­u­cated peo­ple who work closely to­gether, shar­ing knowl­edge, op­por­tu­ni­ties and fund­ing, in or­der to create new prod­ucts, ser­vices and sci­en­tific ad­vances. Fi­nally, as cities – pools of peo­ple liv­ing closely to­gether and shar­ing re­sources.

At the mo­ment, we have enough peo­ple to make things func­tion rea­son­ably well in many of these ar­eas. But if we ex­am­ine each of these pop­u­la­tion group­ings and their am­bi­tions, we start to see the ca­pac­ity that is miss­ing, the po­ten­tial that is un­tapped or un­avail­able, and the miss­ing hu­man re­sources that leave us un­pre­pared for a more chal­leng­ing

fu­ture.

Fast-shift­ing ra­tios

When schol­ars and govern­ments talk about pop­u­la­tion short­falls these days, they are most of­ten look­ing at the de­mo­graphic and fis­cal chal­lenges of a pop­u­la­tion that’s grow­ing slowly and ag­ing quickly.

This loom­ing de­mo­graphic crunch is not the most grave or in­sol­u­ble prob­lem of un­der­pop­u­la­tion, and it is largely a medium-term prob­lem, set to un­fold over the next 40 or 50 years. But it hap­pens to be one that ter­ri­fies govern­ments, econ­o­mists and in­vestors, hav­ing as it does the po­ten­tial to mea­sur­ably lower our pro­duc­tiv­ity and qual­ity of life.

Be­cause our lack­lus­tre fam­ily poli­cies do lit­tle to en­cour­age larger fam­ily sizes, Canada’s pop­u­la­tion growth cur­rently de­pends en­tirely on im­mi­gra­tion. But our im­mi­gra­tion num­bers are mod­est – we’d need to take in two mil­lion peo­ple a year to ap­proach the pop­u­la­tion lev­els of the early 20th cen­tury. As a con­se­quence, the num­ber of baby boomers turn­ing 65 each year out­num­bers the ba­bies and chil­dren join­ing Canada’s pop­u­la­tion through child­birth and im­mi­gra­tion. For the first time in our his­tory, there are now more Cana­di­ans over 65 than there are Cana­di­ans 14 and younger.

At the mo­ment, roughly 16 per cent of Cana­di­ans are 65 and older. By 2035, at cur­rent pop­u­la­tion-growth rates, that pro­por­tion will have risen by more than half, to 25 per cent.

In the mean­time, by 2026, more than 2.4 mil­lion Cana­di­ans over 65 will re­quire con­tin­u­ing­care sup­port (long-term care, med­i­cal sup­port, in-home care and so on). That’s a 71-per-cent in­crease from 2011. By 2046, there will 3.3 mil­lion such Cana­di­ans.

Those num­bers af­fect the de­pen­dency ra­tio: the num­ber of work­ing-age peo­ple (who con­trib­ute the lion’s share of taxes) com­pared to the num­ber of re­tire­ment-age peo­ple (who tend to con­sume con­sid­er­ably more tax-sup­ported ser­vices). In Canada, this ra­tio is shift­ing quickly. At the mo­ment, there are four work­ing-age Cana­di­ans to sup­port each of those who have made it to re­tire­ment age. By 2031, that ra­tio will be halved: For a cou­ple of decades, as the baby boom en­ters its fi­nal years, we will have only about two tax­pay­ers to sup­port each se­nior. This will be ex­pen­sive. Ac­cord­ing to the Con­fer­ence Board of Canada, spend­ing on con­tin­u­ing care for se­niors will need to in­crease from $29-bil­lion in 2011 to an ex­tra­or­di­nary $184bil­lion – in to­day’s dol­lars – in 2046. Two-thirds of that bill is paid for by govern­ments.

An older pop­u­la­tion is also more prone to ex­pen­sive health trou­bles. As a re­sult, health-care spend­ing by prov­inces, cur­rently com­ing in at $150-bil­lion a year, will in­crease from 37 per cent of gov­ern­ment rev­enue to­day to 44 per cent by 2042. Like­wise, the share of fed­eral tax earn­ings that will have to be spent on Old Age Se­cu­rity – Canada’s largest gov­ern­ment cost – will have to rise by 20 per cent by the 2030s.

Most of this ad­just­ment will need to come from large-scale re­duc­tions to other gov­ern­ment de­part­ments and pro­grams, in­clud­ing ed­u­ca­tion, tran­sit in­fra­struc­ture, the so­cial safety net and en­vi­ron­men­tal pro­tec­tion – that is, al­most ev­ery area con­sid­ered cen­tral to gen­er­at­ing fu­ture growth and sus­tain­abil­ity. The po­ten­tial re­sult: a vi­cious cy­cle of eco­nomic, de­mo­graphic and eco­log­i­cal de­cline.

That is not the only pos­si­ble fu­ture. It could be a lot tougher. Ac­cord­ing to Con­fer­ence Board fore­casts, if im­mi­gra­tion were re­stricted to half its cur­rent level in com­ing decades, the ef­fect on pop­u­la­tion would cause eco­nomic growth to fall to an av­er­age of 0.6 per cent an­nu­ally, from the cur­rently pro­jected 1.5 per cent.

By con­trast, if Canada were to pur­sue a growth strat­egy aimed at tripling its pop­u­la­tion by 2100 through mod­est im­mi­gra­tion and fam­ily-pol­icy in­cen­tives, pro­jected eco­nomic growth would rise to 2.6 per cent an­nu­ally. And, as a fur­ther con­se­quence of this larger, younger pop­u­la­tion, both gov­ern­ment ex­pen­di­tures and tax bur­dens would drop dra­mat­i­cally dur­ing the crunch years of the 2030s and 2040s.

More im­por­tantly, that added pop­u­la­tion would pro­vide last­ing ben­e­fits to our eco­nomic, eco­log­i­cal and cul­tural life.

Mar­kets and crit­i­cal mass

If you’re work­ing in a busi­ness that op­er­ates at a na­tional or in­ter­na­tional level, you prob­a­bly al­ready know this: Canada’s de­sire to build a more di­ver­si­fied, in­no­va­tion-based econ­omy of­ten hits the brick wall of a lim­ited do­mes­tic mar­ket. Or it runs aground on Canada’s com­par­a­tively sparse dis­tri­bu­tion of in­vestors and ven­ture cap­i­tal­ists, top tech­ni­cal minds and skilled spe­cial­ists.

Our ex­ist­ing pop­u­la­tion is well equipped for the coun­try to be­come a cre­ative-econ­omy leader: Cana­di­ans are now among the most ed­u­cated peo­ple in the world. Two-thirds of us have post­sec­ondary ed­u­ca­tions. And Canada is in the top hand­ful of na­tions in mea­sures of patents, re­search pa­pers and No­bel Prizes per capita.

But any­one in busi­ness will tell you that there are real lim­its to what can be ac­com­plished, given Canada’s low-den­sity pop­u­la­tion – a small mar­ket, spread across five time zones, two of­fi­cial lan­guages and 13 po­lit­i­cal ju­ris­dic­tions. And those lim­its will be­come only more ev­i­dent if the trade-pro­tec­tion­ist threats of Don­ald Trump and his fel­low dem­a­gogues in other coun­tries suc­ceed in curb­ing world trade.

Over the past 20 years a sub­stan­tial vol­ume of re­search has been con­ducted by econ­o­mists into the fac­tors that al­low com­pa­nies to achieve “take­off” into the global econ­omy. And there is a strong con­sen­sus that mar­ket size is crit­i­cal – not just the con­sumer mar­ket, but the mar­kets in skills, em­ploy­ees, ser­vices, patents and ex­per­tise. Har­vard econ­o­mist Al­berto Alesina, in an oft-cited study, found that a coun­try’s phys­i­cal size mat­ters lit­tle, but that the size of its do­mes­tic mar­kets – and their con­cen­tra­tion within a par­tic­u­lar ge­o­graphic space – mat­ters a lot.

Canada’s most suc­cess­ful com­pa­nies of the re­cent past, from the for­merly dom­i­nant smart­phone-maker Black­Berry to the cur­rently boom­ing con­ve­nience­s­tore gi­ant Couche-Tard, have of­ten taken a “straight-to-global” or “mini-multi­na­tional” ap­proach by aim­ing for far larger world­wide con­sumer mar­kets from the be­gin­ning. But that has be­come a more dif­fi­cult path to fol­low dur­ing the past decade. Aside from the loom­ing threat of pro­tec­tion­ism un­der Mr. Trump, there are two new bar­ri­ers to be­com­ing in­ter­na­tion­ally com­pet­i­tive.

First, many of the world’s largest govern­ments are giv­ing ex­clu­sive ac­cess to their own coun­tries’ busi­nesses when it comes to public-sec­tor pur­chas­ing con­tracts. In 2009, at the peak of the fi­nan­cial cri­sis, the United States passed the sprawl­ing Amer­i­can Re­cov­ery and Rein­vest­ment Act, whose Buy Amer­i­can pro­vi­sion gives U.S. firms a huge com­pet­i­tive edge by guar­an­tee­ing them a gi­gan­tic and wealthy do­mes­tic client. Canada is the­o­ret­i­cally ex­empt, but the act gives Amer­i­can firms a clear do­mes­tic-mar­ket ad­van­tage. The U.S. is not an out­lier here: Since 2008, In­dia, China and other gi­ant economies (the EU is a lone ex­cep­tion) have in­tro­duced sim­i­lar schemes.

In a sec­ond ma­jor change, since 2008 larger economies have be­gun pour­ing huge sums of public money into the R&D bud­gets of their favoured do­mes­tic com­pa­nies and sec­tors – a form of sub­sidy that is not re­stricted by the World Trade Or­ga­ni­za­tion.

This is where Canada gets tripped up by its low pop­u­la­tion. Un­like com­pa­nies head­quar­tered in larger economies, Canada’s in­ter­na­tional busi­nesses can’t fall back on the coun­try’s do­mes­tic mar­ket – it’s just not big enough. And while we do sub­si­dize favoured in­dus­tries, our small fis­cal base pre­vents us from dump­ing R&D fund­ing into en­tire sec­tors on the same scale as does China or the U.S.

“We’re de­pen­dent on the in­ter­na­tional mar­ket,” says Dan Her­man, the founder of the Cen­tre for Dig­i­tal En­trepreneur­ship and Eco­nomic Per­for­mance, based in Water­loo, Ont. “But the in­ter­na­tional mar­ket is in­creas­ingly look­ing in­ward. … China and In­dia and the rest of Asia, they’ve be­come in­ward-look­ing. … That’s when you get back to the 34 mil­lion and you ask, ‘What can you sell to that mar­ket and ac­tu­ally build big com­pa­nies?’ Not much. ‘What can you do for an in­ter­na­tional com­pany in terms of gov­ern­ment con­tracts?’ Not much.”

Green­ing through growth

There is also the ef­fect of un­der­pop­u­la­tion on our eco­log­i­cal prospects, and it plays out in two im­por­tant ways.

First, it forces us to use in­ef­fi­cient and highly pol­lut­ing forms of trans­porta­tion, heat­ing and en­ergy, be­cause our larger ur­ban ar­eas are too thinly pop­u­lated to sup­port more en­ergy-ef­fi­cient tech­nol­ogy. And it de­nies us the crit­i­cal mass of peo­ple, and their tax dol­lars, that we need to build in­fra­struc­ture for green-en­ergy gen­er­a­tion and low-en­ergy na­tional trans­porta­tion net­works, and to pro­tect us against the ef­fects of cli­mate change.

Canada’s largest source of green­house-gas emis­sions dur­ing most years, ac­count­ing for a quar­ter of the car­bon we emit, is trans­porta­tion. Pri­vate pas­sen­ger ve­hi­cles gen­er­ate the largest share of those by far, and most of their out­put is in ur­ban ar­eas. The heat­ing of build­ings – es­pe­cially sin­gle-fam­ily homes in cities and sub­urbs – ac­counts for an­other 12 per cent; and the use of in­ef­fi­cient fos­sil-fuel elec­tri­cal gen­er­a­tion, 11 per cent.

In other words, half of Canada’s at­mo­spheric dam­age is caused by fac­tors di­rectly rooted in our low pop­u­la­tion den­sity. We don’t have the masses of peo­ple needed to re­place in­ter­nal-com­bus­tion trans­porta­tion with cut­ting-edge public tran­sit and high-speed rail; we rely too much on sprawl­ing sin­gle-fam­ily dwellings that lack heat­ing ef­fi­ciency; and we still don’t have the pop­u­la­tion size to pay for rapid re­place­ment of fos­sil-fuel-based power gen­er­a­tion with non-fos­sil en­ergy sources (although that change is tak­ing place, slowly).

Metro Van­cou­ver, the Greater Toronto Area and Greater Mon­treal have reached par­tic­u­larly frus­trat­ing points in their devel­op­ment. They are now large and pop­u­lated enough that they face a se­vere need for cru­cial in­fra­struc­ture, such as more high­speed public tran­sit and fast re­gional rail lines. But out­side their down­town cores, they have not at­tained the pop­u­la­tion den­sity that can pro­vide the rid­er­ship lev­els to sup­port high-ef­fi­ciency rapid-tran­sit de­vel­op­ments. And they are not pop­u­lous enough yet to have the rev­enues or voter clout to make such de­vel­op­ments hap­pen. They find them­selves ur­gently need­ing the trans­porta­tion net­works of cities with two or three times their pop­u­la­tion. The re­sult for their res­i­dents is grid­lock, iso­la­tion and re­duced mo­bil­ity.

Re­search by Luis Bet­ten­court, a the­o­ret­i­cal physi­cist and pro­fes­sor of com­plex sys­tems at the Santa Fe In­sti­tute, has found a con­sis­tent world-wide pat­tern: As cities scale up in size, they gen­er­ate more pros­per­ity – and use much less en­ergy – per per­son: “A city of eight mil­lion typ­i­cally needs 15 per cent less of the same in­fra­struc­ture than do two cities of four mil­lion each,” he says.

The eco­log­i­cal ben­e­fits of higher pop­u­la­tion den­sity are par­tic­u­larly strong. As Dr. Bet­ten­court’s re­search has found, the largest cities in North Amer­ica have the low­est per-capita car­bon-diox­ide emis­sions. That gain is not a re­sult of green poli­cies, he finds, but a sim­ple byprod­uct of “en­ergy-ef­fi­cient public trans­porta­tion and sim­ple walk­ing in­stead of driv­ing” – a den­sity-driven change to forms of trans­porta­tion that are 10 times more en­ergy-ef­fi­cient.

In ad­di­tion to greater den­sity, an in­crease in the to­tal num­ber of Cana­di­ans – and thus, Cana­dian tax­pay­ers – will also make it eas­ier to ad­dress eco­log­i­cal is­sues. In the com­ing decades, govern­ments will need to build coastal de­fences against ris­ing sea lev­els, re­place ur­ban in­fra­struc­ture so that it will be more re­sis­tant to volatile weather pat­terns, par­tic­i­pate in a global drive to build car­bon-re­moval tech­nol­ogy, take mea­sures to make our ex­trac­tive in­dus­tries more car­bon-neu­tral, and shift to non­pol­lut­ing en­ergy sources.

The cost of these shifts, for both the public and pri­vate sec­tors, will be huge. A 2011 re­search report by the Na­tional Round Table on the En­vi­ron­ment and the Econ­omy es­ti­mated that cli­mate de­fences alone, even at a mod­est level, will cost Cana­dian govern­ments some­where be-

IL­LUS­TRA­TIONS BY RAY­MOND BIESINGER FOR THE GLOBE AND MAIL

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