Canadians often hold a high opinion of themselves, but this self-image is increasingly challenged by incomes that continue to fall behind those in the United States. A recent screening of the Montreal Economic Institute's film 'L'Illusion tranquille' ('The Quiet Illusion') highlights this disparity. The title plays on Quebec's 'Quiet Revolution' of the 1960s, but the reality is that Quebec's average income lags behind most other states and provinces.
Quebec's Economic Standing in North America
The documentary reveals a striking statistic: Quebec ranks near the bottom of GDP per capita among the 60 states and provinces of North America. UQAM Professor Pierre Fortin calculated that in 2018, GDP per capita in neighboring New York state was $87,000, nearly double Quebec's $48,000 (both in U.S. dollars at purchasing power parity). This gap underscores the illusion that Quebec is a model for others to follow.
When the audience was asked for reactions after the screening, one comment suggested the film was overly pessimistic. However, the documentary arguably fails to capture how quickly the United States has been pulling ahead of Canada in recent years, particularly in developing and deploying innovative technologies like artificial intelligence.
U.S. Economic Surge in Technology
The U.S. economy is experiencing a surge in spending by its technology giants. The four leading tech companies—Alphabet, Meta, Apple, and Microsoft—are collectively planning $650 billion in spending on AI infrastructure. Total U.S. spending on AI this year is expected to reach nearly $1 trillion, exceeding the entire defense budget.
Driven by rising business investment, American real GDP grew 2.7% in the past year. Since the fourth quarter of 2024, investment has increased by 8.2%. This growth occurred despite the Trump administration's policies, including tariffs and industrial policy meddling, which have stoked inflation and widened the budget deficit. While Trump promised tariffs would bring production back to the U.S., manufacturing investment actually declined 15% over the past year, according to the Census Bureau. Instead, investment surged 27.6% in information-processing equipment and software.
Canada's Struggling Economy
In contrast, Canada managed only a 0.7% gain in real GDP over the past year, with business investment falling 1.2%, continuing a decade-long slump. Statistics Canada's annual survey of business investment intentions suggests no improvement for the rest of 2026. Only consumer and government spending have expanded, while the private sector remains stagnant.
Canada's shrinking international stature was epitomized by recent comments from Bloomberg Surveillance co-hosts Jonathan Ferro and Lisa Abramowitz. During an interview with Invesco's Matt Brill, they discussed Alphabet's fundraising in European and Canadian markets after tapping the U.S. market three times earlier this year. Ferro laughingly described Alphabet's $8.5 billion raise in Canada as the corporate equivalent of searching for 'nickels and dimes under the couch cushions.' This ridicule of Canada's trivial role in global finance is particularly galling for Prime Minister Mark Carney, a former Goldman Sachs investment banker who specialized in corporate deals.
The Urgent Need for Action
Canada's slow economic growth is a pressing issue that cannot be ignored. Without significant increases in business investment and productivity, the gap with the U.S. will continue to widen, threatening the nation's prosperity and standard of living. Policymakers must focus on creating a competitive environment that encourages innovation and investment, particularly in emerging technologies like AI, to reverse this troubling trend.
