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Give Canadian Workers the Tools to do the Job! Why Canada Needs More Robust Capital Investment

Robin Banerjee and William B.P. Robson argue that Canada’s capital investment is lagging behind other OECD countries. As the authors explain, the decline in private-sector capital formation means that for every dollar invested in the average worker living in an OECD (Organisation for Economic Co-Operation and Development) member state, the Canadian counterpart will receive 94 cents. Compared to G7 workers taken as a whole, however, Canadians will receive 90 cents. And compared to US workers specifically Canadians will receive only 82 cents in new capital investment. According to Banerjee and Robson, this under-investment in Canada is not new, but is unexpected given the appreciation of the Canadian dollar, which has lowered the cost of imports for machinery and equipment. The authors contend that in the past the low Canadian dollar was often to blame for low investment rates; with the resurgence of the dollar, however, there must be an alternative cause. Banerjee and Robson attribute this low investment to the high tax on capital formation in Canada and the great degree of regulation that can hamper innovation in key sectors like telecommunications, financial services, and health care. Furthermore, the authors argue that in order for Canada to remain competitive in attracting investment, to take advantage of its natural and human resources, and its unique access to the American market, federal and provincial governments must take action.