Canada's Investment Crisis Deepens as Government Priorities Shift
As the gap between Canada's feeble capital investment and surging investment in the United States continues to widen, so too does the disconnect between the Carney government's rhetoric about investing for prosperity and its actual policy direction. Last week's announcement of the Canada Groceries and Essentials Benefit—an income-support add-on to the GST credit designed to address affordability concerns—represents another step toward debt-fuelled consumption rather than productive investment.
The Troubling Investment Landscape
A decade of weak capital investment has significantly undermined Canada's real GDP per person, which has recently been declining. This economic stagnation manifests in multiple concerning indicators: unemployment is rising, consumer and business confidence is falling, and many young Canadians feel that home ownership and other milestones their parents enjoyed are increasingly out of reach. The resulting economic stress is eroding confidence in national institutions, with concerning numbers of Canadians in Quebec and Alberta openly questioning the value of a united Canada.
Business investment per member of Canada's workforce peaked in 2014, when the average potential worker benefited from approximately $19,000 in new capital (all values in 2024 Canadian dollars). The latest available data, from the third quarter of last year, shows annualized investment has fallen below $15,000—representing a decline of nearly 25 percent. As detailed in the C.D. Howe Institute's latest investment monitor comparing Canada, the U.S., and other developed countries, Canadian workers cannot meaningfully raise their output or incomes when their tools and infrastructure are deteriorating.
The Stark U.S. Comparison
The contrast with recent United States investment numbers is particularly striking. In the third quarter of 2025, U.S. investment per worker exceeded $29,000 (in 2024 Canadian dollars), representing an increase of more than seven percent since 2014. For every dollar of new capital per U.S. worker in 2014, the average Canadian worker received just 70 cents. By the third quarter of last year, that ratio had plummeted to only 52 cents.
Business investment typically falls into three main categories:
- Intellectual property products (where the U.S. maintains an advantage due to its larger technology sector)
- Non-residential construction (where Canada holds an edge because of our substantial natural resource sector)
- Machinery and equipment (M&E)
The M&E category is especially critical for Canada's future competitiveness in traded goods, and here the situation is particularly dire. In 2014, for every dollar of new M&E per U.S. worker, the average Canadian worker benefited from only 44 cents. By the third quarter of last year, that figure had dropped to a paltry 36 cents—meaning Canadian workers now receive barely one-third the new machinery and equipment investment enjoyed by their American counterparts.
Government Rhetoric Versus Reality
Despite the Carney government's frequent statements about Canada's urgent need for investment—to strengthen our industrial base, develop natural resources, and improve transportation efficiency for domestic and international markets—the actual policy direction continues to prioritize consumption over capital formation. The Canada Groceries and Essentials Benefit represents the latest example of this trend, echoing the debt-financed transfers that characterized much of the past decade.
This persistent pattern of fiscal policy has contributed significantly to Canada's declining competitiveness and prosperity over the last ten years. As investment continues to lag and consumption-focused policies accumulate more government debt, the fundamental challenges facing Canada's economy become increasingly difficult to address through short-term measures that fail to build productive capacity for future generations.
