Ottawa’s stifling policies will test optimism of Canadian CEOs

As president of the Fraser Institute, I study and analyze business and economic climates in Canada and around the world. And as Canada’s incoming regional chair of the Young President’s Organization (YPO), a global leadership community of 35,000 chief executives and business leaders, I help communicate the insights of YPO’s membership.

Each quarter, YPO conducts its Global Pulse Survey of its members to gather insights and opinions from chief executives worldwide. One of the things I love about my YPO colleagues is their optimism, which typically comes out in the survey. This quarter’s survey produced some interesting results for Canada.

When asked how the overall business and economic climate in their country affected their companies compared to six months ago, 38.7 per cent of global respondents said it’s much or somewhat better while 37 per cent said it’s about the same. That means less than 25 per cent of respondents worldwide feel things are getting worse—compared to 28 per cent among respondents in Canada alone.

More worryingly, while 19.6 per cent of respondents worldwide expect an economic recession next year in their jurisdiction, that percentage jumps to 29.4 per cent among respondents in Canada, the most pessimistic jurisdiction on this question in the survey. The good news is that Canadian CEOs are more optimistic than six months ago, when 40.9 per cent of Canadian respondents expected a recession.

But this uptick in optimism will likely not last. The survey was done before the latest federal budget delivered in April, which increased taxes on capital gains, deterring investment and encouraging a more significant outflow of capital. The budget also forecasted deficits for at least five years, which increases the likelihood of future tax hikes and creates more uncertainty for entrepreneurs, investors and businesses. The response in Canada’s business community and throughout much of the media was that the budget was a significant step backward for Canada.

And they’re right. The success of any economy hinges on its institutions including its laws and regulations. While entrepreneurial talent is universal, these institutions help establish a business climate and ultimately determine whether entrepreneurs engage in productive society-enhancing activities. At the Fraser Institute, we annually produce the Economic Freedom of the World (EFW) index, which measures the economic freedom—that is, the ability of citizens to make their own economic decisions—by evaluating five key areas: Size of Government, Legal System and Property Rights, Sound Money, Freedom to Trade Internationally, and Regulation.

So, where have we been and where are we going?

Globally, economic freedom rose throughout the 1980s and 1990s as western democracies deregulated and formerly socialist countries liberalized. But since 2000, the pace of reform has slowed. The high mark for Canadian economic freedom occurred in 2000. Except for a three-year period (2011-2014) when economic freedom in Canada increased, governments in Canada have steadily curtailed our economic freedom, undoing decades of progress. Not since the early-1980s have Canadians experienced such low levels of economic freedom, with their business and economic climates suffering.

In fact, according to the latest EFW report released in September 2023, Canada has one of the fastest growth rates in size of government in the world (a larger government means less space for free exchange in the private sector). And for the first time, every Canadian province ranks in the bottom half of jurisdictions in our annual rankings of economic freedom in North America.

Clearly, Canada is heading in the wrong direction. If governments across the country—including in Ottawa—want to reverse these troubling trends and change the perceptions of business leaders, they should enact pro-growth policies that have proven time and again to spread prosperity throughout the economy.