Rebuilding Strong Business Recovery in the USA and Canada

COVID-19 is primarily a human catastrophe, causing enormous suffering and underlining profound injustices in Canada and around the world. The extent of the resulting economic collapse is unprecedented: for the first time since the conclusion of World War II, advanced, developing, and rising nations worldwide are all facing severe recessions at the same time. In Canada, it has hammered the private sector, compelling governments to take previously unthinkable actions. As Canada takes attempts to restart its economy, governments beset with heavy debt and limited revenue will fight to remove rules while also containing the virus.

With such uncertainty, there is a desire to see the economy return to normal.

However, this cannot be our purpose. The unpleasant truth is that, prior to the crisis, the Canadian economy was already in neutral, with slowing growth, low productivity, and losing competitiveness. The crisis has also demonstrated that robust economic development alone is not sufficient; economic benefits must be spread evenly across society in order to offer chances for all Canadians to succeed. Society is demanding change not only to address the pandemic's heightened disparities, but also to address existing systemic injustices against numerous groups in our country, such as racialized populations, Indigenous people, and LGBTQ+ communities. This change must be radical, not incremental. For too long, Canada has advocated for inclusive growth but has failed to make it a reality. We must act quickly and decisively to prevent a return to normalcy. The time calls for greater ambition—previous recovery plans from economic shocks, such as Tommy Douglas's development of Social Welfare in Canada and the Marshall Plan internationally, transformed economies and societies, recognizing the need to create more equitable prosperity. Today, the government and business must work together to build a better future that includes not only a strong economy, but also a more resilient and egalitarian society. This paper revisits Canada's most critical competitiveness concerns, explores how the COVID-19 crisis has altered the nature of the difficulties ahead, and identifies five areas where business, government, and communities must take decisive action to ensure a better future for Canada.

Our poor performance in terms of construction permit processing (64th) and securing a permanent electrical connection (124th) demonstrates the regulatory burden that businesses endure.

Normal was not good enough. Canadian growth and competitiveness prior to the epidemic Canada's slow economic development and competitiveness difficulties have been extensively analyzed over the years, particularly by Deloitte. In 2018, we created the Competitiveness Scorecard to assess Canada's worldwide standing, which found that our country's decades-long pattern of low productivity and deteriorating competitiveness was weighing down our prosperity and living standards in comparison to our peers. Three of the most significant difficulties mentioned in the Scorecard (Figure 1) were: Infrastructure: According to the World Economic Forum's (WEF) Global Competitiveness Index for 2017/18, our infrastructure ranks 16th in the world, with deficits in road, rail, and electricity/telephony infrastructure. Since then, our ranking has dropped to 26th, with corresponding losses in each sub-rank. Furthermore, while digital infrastructure was not specifically mentioned in the initial competitiveness assessment, the WEF ranked Canada 35th in the world in 2019. Innovation: Since the publishing of the scorecard, Canada's overall expenditure on research and development as a proportion of GDP has continued to fall, with our 2019 spend at 1.54 percent, significantly below that of other industrialized countries. Canada's weakness in patents and high-tech exports as a fraction of overall exports has likewise not improved significantly. Regulation: In 2019, Canada rated 23rd (down from fourth in 2004) in the World Bank's Ease of Doing Business Index.

Our bad competitive position leading up to the epidemic makes recovery more challenging. Canada's infrastructural deficiencies impede trade and investment.

Our lack of innovation means that our businesses lack the cutting-edge technology and expertise required to compete on a global scale. Our laws make it even more difficult for firms to grow. These challenges slowed our economic growth before the crisis and will continue to do so after it. For example, prior to the pandemic, we anticipated that the Canadian economy would grow at 1.6 percent per year for the next decade[1], which was already much lower than the previous decade's annual average growth of 2.2 percent.[ Not only has our economy stagnated, but we have also failed to grow in a more sustainable and inclusive manner. For example, in 2017, Canadians created the tenth most CO2 emissions globally and the third highest per capita. Deloitte's 2017 diversity and inclusion report also highlighted how women, recent immigrants, and individuals with disabilities remain underrepresented in the workplace. There are also more challenges that our country has failed to solve, including environmental sustainability, social equality, and our worldwide status. Canada's recovery route is unknown, influenced by the virus's ongoing health effects and the impact on full economic activity. Deloitte forecasts that the Canadian economy would not recover to pre-pandemic levels until Q1 2022 in real terms (Figure 2), and the unemployment rate will also take longer to recover. There is also a downside risk to our forecasts due to health-related issues such as additional waves of viral epidemics, which we account for in our alternative negative economic scenarios.