In the story of Canada’s sagging productivity growth in recent decades, there is a rotating cast of villains.

Sometimes, high taxation is singled out for blame, with a outsized burden on personal and corporate income – choosing to tax success rather than consumption.

Others point to the grip of a growing morass of regulatory red tape, with new layers added year after year. And still others see this country’s protectionist bent as culpable: restrictions on foreign investment that leave Canada badly out of step with other modern economies.

The damage is plain to see. Canada’s productivity growth has lagged for years. Real gross domestic product per capita has flatlined over the last four years, with the second quarter of this year marginally higher than in the same period of 2021. Longer term, the Organization for Economic Co-operation and Development has warned that Canada is projected to lag its peers in per capita growth in coming decades.

Of course, each of those three bad policy choices, decades in the making, play a role in Canada’s deep-seated economic malaise. Each would be bad on its own. But together, they act to prop up each other – leaning on each other for support.

Protectionist policies reduce competition, tempting governments to remedy the resulting market failures through regulation. The ever-growing number of regulations inflates the cost of doing business, but also shields incumbents from upstarts unable to afford lobbyists, law firms and regulatory compliance departments. That insulation from competition protects profit margins and makes the burden of excessive taxation a little easier to bear.

And to bring it full circle, as the burden of regulations and taxation erodes competitiveness and dulls innovation, it increases the clamour for protection against foreign competition. The result is corporate complacency, a willingness to settle for the lukewarm results of not-bad........

© The Globe and Mail