From dissatisfaction with the Trudeau government to
dissatisfaction with Trump’s policies – compounded by
general anxiety around tariffs, the economy and a
deteriorating relationship with the U.S. – navigating an
economic downturn should be an immediate priority for Canada
as it heads into a federal election, a new report
recommends.
In the long-term, however, it says Canada
will need greater economic diversification and regional
representation.
“Although it is wealthy by global
standards, Canada’s economy faces key vulnerabilities such
as excessive reliance on extractive industries, shortages of
critical goods like housing and heavy dependence on exports
to the U.S.,” states a Canada BGI Report (https://ucla.app.box.com/s/5ospdh0cc7lcqg4uyh3shk90hqrx47od)
on the country’s governance performance, released a little
more than ten days before the April 28 federal
election.
The report, based on the Berggruen
Governance Index (BGI) (https://governance.luskin.ucla.edu/publications-2-2/)
, was conducted by researchers from the Los Angeles-based
Berggruen Institute think tank, the Luskin School of Public
Affairs at the University of California Los Angeles (UCLA)
and the Hertie School, a German university.
Currently,
Canada ranks only 48th on the Economic Complexity Index.
“Given its wealth, this is a disproportionately low figure
and increasing it should be a top priority,” said the
report.
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The Berggruen Governance Index (BGI) Project
analyzes the relationship between democratic accountability,
state capacity and the provision of public goods to develop
a deeper understanding of how governments can create a more
resilient future for their people.
While Canada scores
highly on most measures of the BGI, the report found that
Canada’s performance “has been uneven over the last decade”
and for many years has failed to address systemic
problems.
These problems, however, have been
overshadowed by U.S. President Donald Trump.
Until
recently, analysts predicted a landslide victory for the
Conservatives under Pierre Poilievre, since the Liberals,
under former Prime Minister Justin Trudeau, had become
deeply unpopular over numerous policy decisions, including
immigration.
But the Liberals have “experienced one of
the most dramatic electoral turnarounds in recent political
history,” according to the Canada BGI Report, attributing
the ascension of Trump to the U.S. presidency in January
2025 to this reversal of fortunes.
This reversal also
coincided with the resignation of Trudeau and the selection
of former Bank of Canada and Bank of England Governor Mark
Carney as the new Liberal leader.
“Repeated threats of
tariffs and even territorial annexation provoked outrage
among Canadians and ignited a surge in patriotic sentiment,
to which Poilievre’s defeatist ‘Canada is broken’ rhetoric
was particularly ill-suited,” the researchers
wrote.
Carney has rallied Canadians around national
unity – and managed to solidify a poll swing back to the
Liberals. What seemed like an inevitable win for the
Conservatives just a few months ago has become a close race
to the finish line.
While the Canada BGI Report found
that Carney’s vision of “One Canadian Economy” appears to be
a politically successful response to the crises Canada faces
from the U.S., in the long-run Canada will need to contend
with “persistent economic tensions” and “overcome governance
challenges that predate both Trump and Trudeau”, the report
said.
The BGI scores for state capacity and democratic
accountability “trail those of many Western European peers,”
according to the report, with institutional accountability
falling by seven points from 2000 to 2021.
This
indicates disillusionment with Canada’s institutions;
researchers found that public trust in government steadily
declined throughout the 2010s. “Coupled with eroding faith
in democratic institutions and lingering regional tensions,
the previous unpopularity of Trudeau’s Liberals appears to
reflect systemic issues rather than an anomaly,” according
to the Canada BGI Report.
A major flashpoint for
Canadians is immigration. Canada has long been a supporter
of greater immigration but, by 2024, public sentiment had
shifted – helping to propel the Conservatives to the top of
the polls. Canada’s international migration surged 15-fold
under Trudeau – with the aim of meeting the country’s
current labour shortage – but Ottawa started coming under
fire for housing inflation.
Canada has one of the
highest housing price-to-income ratios in the developed
world, according to the OECD. One reason is stagnant
homebuilding, with the number of dwellings per 1,000
residents far below the G7 standard. With homeownership
rates declining, that has led to increasing backlash toward
immigrants and newcomers.
Canada has also struggled
with excessive reliance on extractive industries and heavy
dependence on exports to the U.S. With current tensions
between Canada and the U.S., “reliance on both oil and
exports remains a major feature of the country’s economy and
has recently been exposed as a geoeconomic vulnerability,”
according to the researchers.
However, the persistent
challenges of regional representation and limited state
capacity “will make it increasingly challenging to enact
far-reaching plans for economic integration and greater
political sovereignty.”
The report said that
addressing these challenges will require investments in
state capacity, economic diversification – both sectorally
and geographically – and building greater democratic
legitimacy through regional inclusion.
Researchers
recommend the next government “complete Trudeau’s unfinished
goal of introducing a proportional representation system”
that includes greater geographic representation and
inclusion of First Nations peoples, which will be “critical
for increasing legitimacy and national unity.”
Polls
now project a Liberal majority in the House of
Commons.
