Canada Is Part of the Anti-Convergence Club

Economists widely agree with the theory of “convergence,” which is the (mostly true) idea that poor nations should grow faster than rich nations as they catch up (converge).

But there are exceptions. Sometimes a richer country will grow faster than a poorer country over a significant period of time, and we can learn from these examples. This is why I created the anti-convergence club.

Our latest example is Canada, which has never been as rich as the United States. But what’s remarkable, as shown in this chart, is that the shortfall has expanded over the past five-plus decades.

The chart comes from an article by Trevor Tombe. Here’s some of his analysis.

Canada’s economy has fallen behind its population growth for the fifth straight quarter, with real GDP per capita declining by 0.1 percent in Q2 2024… This downturn becomes even more striking when viewed in comparison to the United States, which continues to see gains. …A longer historical perspective reveals a striking reality: the gap between the Canadian and American economies has now reached its widest point in nearly a century. …Real GDP per capita in the U.S. now stands at approximately $66,300 (in 2015 dollars), compared to Canada’s $44,400. …Let that sink in for a moment. The U.S. is on track to produce nearly 50 percent more per person than Canada will.

In a column for National Review, Dominic Pino cites Tombe’s work and shares additional unflattering comparisons.

Ontario, home of Canada’s business capital of Toronto, would be the fifth-poorest U.S. state if it joined the union today. Ontario’s GDP per capita is $59,700. Only four states — Alabama ($58,800), Arkansas ($57,400), West Virginia ($56,200), and Mississippi ($49,800) — have lower GDPs per capita. Quebec, with a GDP per capita of $54,400, exceeding only Mississippi’s, would be the second-poorest U.S. state. If Nova Scotia ($45,200), New Brunswick ($47,100), or Prince Edward Island ($48,200) joined the U.S., they would each be the poorest U.S. state. …the U.S. in general is pulling away from Canada, just as it is pulling away from Europe, in economic growth.

There’s a lesson to be learned from this data.

Canada is lagging the United States because it doesn’t give people the same degree of economic liberty.

Or to be more accurate, there are more bad policies in Canada than there are in America.

Part of reason is that Canada never had a Ronald Reagan. And part of the reason is that Canada has been saddled with Justin Trudeau.

P.S. There have been some admirable policy reforms at various times in Canada (such as school choice, welfare reform, corporate tax reform, bank bailouts, regulatory budgeting, spending restraint, the tax treatment of saving, and privatization of air traffic control). But more are needed if the country wants to converge with the U.S.

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Image credit: DoD photo by EJ Hersom | Public Domain.