Canada’s Economic Challenge: Why Innovation and Diversification Are Key

Adebayo Alonge with Prof. Ricardo Hausmann at Harvard circa 2023 AD

Canadians often find themselves criticizing leaders like Justin Trudeau, but as Prof. Hausmann shared with me at Harvard, focusing solely on political figures or complaints won’t solve the deeper issues.
Hausmann told me: “There are preachers aiming to save the world by making people holy, revolutionaries wanting to remove evil, and activists seeking to end inequality by redistributing wealth. But you, just focus on solving problems.”

Source: Harvard Growth Lab

Canada faces a critical challenge: its current standard of living relies heavily on low-complexity natural resources—oil, minerals, etc.—which are becoming less valuable globally. With a GDP per capita at $52,358 and a ranking of 13th richest economy per capita, it still finds itself in a precarious position. Despite being the 41st most complex economy, Canada’s economic complexity has only marginally improved, while the diversification of its exports has declined. The future is scary: a future of low growth, declining productivity and lower standard of living. This is not about Liberals vs. Conservatives – it is a deep structural issue related to the limited export diversification and commercialisation of Canada’s existing know-how and its seeming lack of ability to scale into more complex products.

To tackle low growth, Canada needs to embrace aggressive measures to enhance local production complexity and diversify exports into higher-value products that the world demands. This means more entrepreneurship, more venture funding, and more export orientation.
Simply wringing hands and cursing leaders or betting on political shifts won’t change the current trajectory. Canada must innovate and adapt to secure a sustainable and prosperous future.