Last month, Canada stepped onto the world stage with an uncommon swagger. In a keynote speech at the World Economic Forum in Davos, Switzerland, Prime Minister Stephen Harper scolded his G7 peers for their spendthrift ways and boasted of the benefits we’ve reaped from our fiscal rectitude: the best debt-to-GDP ratio, the lowest tax rate on business investment, the world’s best banking system. Combined with our vast resource wealth and the sorry economic state of much of the developed world, why would capital and talent go anywhere else? “Canada’s choice will be, with clarity and urgency, to seize and to master our future, to be a model of confidence, growth and prosperity in the 21st century,” he announced.
A model of confidence—these aren’t words typically applied to Canada by the business and political elite who gather each year in this Alpine town. But since the financial crisis, and especially following the 2010 Vancouver Olympics, we’ve had a bit of strut in our step, a touch of bravado in our voice. And for good reason. While the United States and swaths of Europe are near bankruptcy, our books, in comparison, look in enviable order. Steady debt reduction, reforms to the tax and pension systems and rigorous financial regulation over the past 15 years enabled Canada to weather the crushing downturn of 2008 better than most of the world.
Our soaring reputation extends well beyond the economy. In recent years, polls and studies have put Canada and our cities at or near the top of places to get an education, establish a business, raise a family and live a long, healthy life. At least two separate surveys concluded last year that Canada is the nation with the top global brand right now. Authorities ranging from Forbes magazine to Justin Bieber have called us the best country on the planet (based on admittedly different criteria). Our pop stars and actors dominate charts and movie marquees. Crime has been dropping for 20 years. Even the quality of our air is exceptional, the World Health Organization reports.
So things are good—but they could get much better. “Canada has a tremendous amount of reputational capital, but it’s not taking advantage of it,” says Rob Jekielek, a principal at New York–based Reputation Institute, a research and consulting company that last fall named Canada the country with the best reputation in the world. We have an enormous opportunity to leverage our moment in the sun to reach greater prosperity and clout—especially, to become a leading force in finance and education, and a true energy superpower. Laurence C. Smith, a UCLA earth sciences professor and author of The World in 2050, a 2010 book that examines how demographics, natural resources, globalization and climate change will transfer economic might to the north, says, “In Canada in particular, all four factors line up very powerfully.”
Dominic Barton, a Canadian who leads the international consulting firm McKinsey & Co.—and is often in the room during top-level discussions of economic strategy—has watched the country’s influence soar. “Canada is more on the agenda and part of the vocabulary,” he reports, with our economy studied at conferences, and British, French and other governments actively borrowing from Canadian policies. Our top two financial overseers enjoy unprecedented prestige, with Bank of Canada governor Mark Carney now charged with reforming global finance as chair of the Financial Stability Board, and Finance Minister Jim Flaherty sought after in international forums as a seasoned voice of pragmatism. “He’s like Columbo. He kind of shuffles,” says Barton of Flaherty. “But when he talks, the pens drop.”
It’s not just power brokers who are revising their views of Canada. The long-bemoaned outflow of our talent to better opportunities abroad—especially south of the border—appears to be reversing. According to Immigration Canada, the number of American temporary residents in this country grew by almost 15% in 2009, and applications for work visas doubled between 2008 and 2010, hitting a record in 2010. What’s more, a recent poll by Angus Reid found that almost half of British respondents would prefer to raise their families in Canada.
Such surveys reflect a starkly different mood in the three nations. Almost nine out of 10 Canadians think this is the best country in the world, and 42% believe our best days lie ahead, Angus Reid found. “We see a level of economic satisfaction that’s insanely higher in Canada than in the U.S. and U.K.,” says Mario Canseco, an Angus Reid vice-president—60% here, compared to mid-teens in the other two countries.
That sense of prosperity is founded not just on labour market or GDP statistics, but on the average person’s standard of living. Over the past decade, our middle class has been steadily gaining on the Americans, and today it is significantly richer. According to the 2011 Credit Suisse Global Wealth Report, the median Canadian’s net worth is now US$89,014—almost 70% higher than the equivalent Yank’s. All of which goes a long way to explaining why the Occupy movement fizzled here. As John Manley, president of the Canadian Council of Chief Executives and former deputy prime minister, noted in a speech last fall on “Canada’s Decade of Opportunity,” much of what the protesters fought for—from higher taxes on the rich to more jobs to reining in of banks—has already been achieved here.
For New Yorker Hunter Tura, Canada’s biggest draw was simply our superior quality of life. So in 2010, he took the job of president and CEO of Bruce Mau Design, a multidisciplinary design firm in Toronto, and moved his family north. “I could live anywhere in the world and do what I do. But I choose to live here,” he says, pointing to everything from good schools to safe neighbourhoods to best-in-class airports. Tura, who describes himself as “a proud American, but a Canadian nationalist,” puts Toronto and Vancouver among what he calls 21st-century cities. “When I’m in Doha or Beijing or Riyadh, these places have intensity and a future-oriented worldview. When I’m in New York or Chicago, I don’t feel the same optimism.”
Consider, then: at a time when most of our peers are struggling, we’re a prosperous society luring talent from around the globe and sitting on an unparalleled diversity of natural resources. Management profs talk about inflection points: moments in the evolution of an industry or an organization when a dramatic change can occur. This seems like such a moment for Canada, a unique opportunity to turbo-charge our growth. “We’re entering a country-competition world,” Barton says, where entire nations rather than individual companies are crafting strategies for economic dominance. So how do we harness our shiny brand to catapult us into a richer, more powerful future?
Manik Talwani sums up Canada’s potential to become an economic giant in two words: energy resources. The geophysicist at Rice University in Houston estimates we have the second-largest deposits of crude oil in the world—as much as 2.5 trillion barrels of bitumen buried in the oilsands of Alberta. Unfortunately, our oil is tougher to get out of the ground, more expensive to refine and ecologically more harmful to process than the reservoirs of the Middle East. Yet as production there declines—Saudi Arabia is pumping out its oil at more than four times the rate of the oilsands, Talwani noted in a New York Times op-ed titled, “Canada: the next oil superpower?”—the incentive to tap hard-to-reach reserves will grow.
Canada, currently the sixth-largest oil producer on the planet, is thus likely to see its ranking rise, especially since the world’s hunger for energy is expected to grow 50% over the next two decades. “The potential is huge because there’s so much oil, but it requires a huge investment,” says Talwani. He estimates it would cost $100 billion to boost production to the levels of today’s leading oil exporters—close to double the current investment in the oilpatch. But he notes that technological advances have already reduced the cost of Canadian bitumen by two-thirds since the 1970s. As demand surges, the needed investment will become more economical.
Another vast storehouse lies in the Arctic. “The north of Canada is very, very favourable [to oil and gas deposits], in geologic conditions,” says Talwani, “but you have to do a lot of work to find out what the reserves are.” A 2008 U.S. geological survey pegged oil reserves north of the Arctic Circle at 90 billion barrels—or 13% of the projected undiscovered oil in the world—and 44 billion barrels of natural gas liquids. All this will become increasingly accessible if global warming melts the polar ice, a phenomenon already transforming northern communities. When UCLA’s Smith travelled to the Arctic to document the effects of climate change, locals would “sigh and oblige me, but then say, ‘There’s also this oil plant going up behind me,’ or, ‘All these Filipino immigrants are pouring in.’”
Over the coming decades, Smith expects an influx of immigrants into the north, drawn by a milder climate and jobs in the resource sector, helping to deliver “an unprecedented economic jolt” to countries like Canada, Russia and Scandinavian nations. But while global warming will help unlock natural reserves, it will actually make conventional access more difficult, he says. Within a decade, ice roads to northern mines will increasingly become impassable mud ruts, making shipping a preferable option. For Canada’s north, “I would really be looking to migrate to a maritime infrastructure rather than land-based,” he says.
Oil is just one of our commodities set to rise in value as the world population balloons. Natural gas, of which we’re the second-largest exporter today, as well as copper and nickel from northern Ontario, and potash and uranium from Saskatchewan, will see steady demand. Much of the future market for these resources will lie in developing nations, but Canada lags comparable powers (notably Australia) in developing trade in fast-growing Asia. Former prime minister Paul Martin, who consults with the International Monetary Fund and other organizations, says that Ottawa is “making token efforts in Latin America, and effectively walking away from Asia and Africa. We’re regarded as somewhat self-satisfied and not very aggressive in seeking to develop new markets.” Yet in countries like China, ruled by powerful regimes, companies need strong diplomatic ties. “Government presence is an imprimatur for the private sector,” says Martin.
The Harper administration has signalled a renewed effort to smooth what had been rocky relations with China. Harper’s February visit to that country was in part aimed at forging trade links with the next generation of Chinese leaders. Canada is also back at the negotiating table to join the Trans-Pacific Partnership, a proposed free-trade zone among Asian-Pacific nations, and a trade deal with the eurozone is said to be close to completion. The best part is, by becoming less reliant on our southern neighbour, numerous observers argue, we won’t be as exposed to regional downturns as we tap more and more of the wealth contained in our vast territories.
There’s much more to Canada than commodities though. Michael Porter, a professor at Harvard Business School who specializes in regional economic strategies, also sees massive unexploited potential in Ontario’s financial sector. In a 2008 study, he concluded that focusing on certain services—specifically life insurance and the financing of natural resource ventures—could lead to significant development. “Just as financial institutions in California were at the forefront of the development of oenological financial products,” he writes, “so should the Canadian financial sector develop specialty products designed for the country’s energy and natural resources industries.”
Since Porter’s study, our financial reputation has only gotten better and better. The World Economic Forum has named our banking system the best in the world four years running. While Wall Street is slashing jobs, Canadian banks reached record global employment last year. Michael Bryant, a visiting professor at York University’s Osgoode Hall Law School and former Ontario attorney-general and minister of economic development, argues this is the ideal time to focus rigorously—“ruthlessly, even”—on promoting our financial industry. “It’s a rare moment in global economic history that people are looking at Canada not for its charm but its expertise,” he says. “And momentum matters in everything.” The Ontario government, for example, should be fostering finance-related post-secondary programs and trying to attract immigrants with specialized financial skills, he says.
Like Porter, Bryant urges a strategy of “picking winners and focusing on those winners” rather than spreading subsidies and tax breaks evenly around the economy. For Toronto to become a global financial capital “would require the growth of a few areas that haven’t already been captured by New York and London,” he says. But we have to act now: the window of opportunity won’t last. Cities like Dubai and Singapore are already aggressively competing to become global centres of finance.
Canadian financial institutions also need to venture further beyond the security of their small and sheltered domestic market. “True sophistication will only come if financial firms have the courage to…compete internationally,” Porter says. With the strong loonie and many leading banks weakened, Canadians are well positioned to do that today. TD and BMO have been picking up assets in the U.S., while Scotiabank, already the largest financial institution in the Caribbean, recently bought a Colombian bank. Our pension funds have also been raising their profiles—and their spending—on the world stage, convening meetings with sovereign wealth funds and pouncing on choice assets in depressed economies.
Xavier Mieles Grunauer, who was raised in Toronto and spent his career in banking all around the planet, can attest to the high global reputation of Canada’s financial talent. When he lived in Hong Kong, he recalls, “most of my colleagues had degrees from Canadian universities, and were quite proud of these. Canada’s reputation in the LKF district [a bar and club cluster in central Hong Kong] is quite high.” (Mieles Grunauer, seeking to settle his young family, is now moving back to Toronto from Sydney.)
Our educational institutions are another area of strength that remains underused. Some Canadian universities, including Toronto’s York and the University of British Columbia, have been aggressive in tapping foreign markets, but it’s a scattered effort by individual institutions. Yet the potential is vast: for Australia, education is now the third-largest export.
A major benefit of selling higher education is that students often stay and build businesses. University-linked research hubs can develop into industrial clusters, “but they have to be world-class, concentrated and cross-sector,” says McKinsey’s Barton, meaning geographically focused but spanning different disciplines’ contributions to a single industry. The University of Waterloo is starting to see such a cluster form in computer science. “I don’t know why we don’t scale that in a big way, by getting 25% of the best physics and high-tech PhDs there,” says Barton. Clean tech is another natural niche, especially for Calgary. Targeting ways to make oilpatch resources greener would help transform the negative perceptions of our energy while drawing talent and money from across the world.
Aside from being a safe economic harbour, Canada has another, lesser-known asset to offer global businesses: a low-tax environment. While the U.S. continues to be viewed as a generous jurisdiction for corporations, in fact, it now has the highest corporate tax rate among major developed nations, eclipsing Japan last year. Canada, that bleeding-heart welfare state? Its rate is among the lowest. The combined federal and provincial taxes on corporations now average 25%, down from 43% at the start of the last decade. This drop was the prime reason why last year Canada shot to the top of Forbes’s rankings of best countries for business.
That’s why this is a great time to court expansion-minded global titans, especially Asian ones, to bring their North American headquarters here rather than the U.S. “Why should they go to New Jersey?” asks Barton. “Vancouver just stands out. People love living there.” But our governments need to make the case, as the Dutch and the Swiss recently did by sending delegations to Asian capitals to promote their cities as European hubs. What should greatly help our pitch is that being based in Canada is now much more prestigious. One CEO of a Toronto-based multinational used to hand out his New York business card while travelling. No more; in fact, his New York colleagues now use their Canadian cards.
Of course, self-promotion has never come easily to Canadians. As Peter C. Newman once put it, we aspire to be Clark Kent, not Superman. Which is partly why we sometimes fail to appreciate how highly this country is esteemed. Tura recalls that at the end of the interviews for his job at Bruce Mau Design, he was asked, somewhat sheepishly, “What do you think of Toronto?”—as if a New Yorker would find the city an uninspiring burg. He thinks the influx of Americans like him, with their more blustery edge, will add a useful ingredient to the earnest, cautious business culture here. “Maybe it takes an American to see what’s at stake,” he says. “In 10 years, Toronto is going to be a global design capital. People who work here are that good. I bring some perspective to say, this is what’s possible.”
Admittedly, there are several threats to Canada’s manifest destiny, starting with stratospheric household debt—already the second-highest among the G7 and rising. Our environmental reputation has also taken a pounding from the oilsands’ dirty image and the withdrawal from the Kyoto Protocol. Still, many larger, richer countries can only wish they had our problems. Our cities regularly top lists of the best places to live and, according to Richard Florida, an influential American academic (who himself moved to Toronto to run an urban prosperity think-tank at the Rotman School of Management), they’re set to become leading centres of growth due to their cultural tolerance and creativity.
For Jihad Abdul-Rahiim, a Toyota engineer who moved to the Toronto suburb of Mississauga in 2010, this diversity is a major draw. “In New York, after a generation, everyone is American. Here, I go out shopping and people are the same as in their home country.” He now finds himself the object of envy. “I get a lot of jealousy from family and friends due to things like health care.”
Unlike the nationalism of more culturally monolithic nations that tends to exclude foreign-born citizens, in Canada it’s immigrants like Abdul-Rahiim and Tura—people who live here by choice, not happenstance—who tend to be the biggest patriots. They have a context for comparison, and an appreciation of our potential. For instance, during his travels around the Arctic, Smith found Canada consistently rose above its northern peers in everything from economic growth to aboriginal rights. “I would never suggest that Canada will become a military superpower like the U.S. and China,” he says. But based on quality of life and future prospects, “it’s a great time to be a Canadian.”