Business investment has crashed because of Ottawa’s policies and until it returns your standard of living will keep falling

Canada is facing an investment crisis. That’s the conclusion the Montreal Economic Institute (MEI) came to in a recent report, which compares foreign and domestic investment data from the end of the Harper era to the end of the Trudeau era.

According to the MEI, the gap between Canadian investment abroad and foreign investment in Canada was roughly 14 per cent in 2014. In other words, Canadians invested slightly more abroad that year compared to what foreigners invested in Canada.

But by 2025, that gap had more than doubled. Canadian investment abroad is now roughly 33 per cent more than foreign investment here in Canada.

Canadian firms and pension funds investing abroad can be a sign of global competitiveness. But it raises an important question: why are returns consistently perceived to be stronger abroad than they are in Canada? Why are Canadian companies investing abroad so much more than foreign companies are investing here?

Ultimately, it’s a question of public policy. Companies don’t have the confidence to invest in Canada because of high taxes, overregulation, and deteriorating government finances. If public policies don’t change in the near future, the gap between Canadian investment abroad and foreign investment in Canada will only continue to grow.

Canadian firms are also investing less at home. Consider machinery and equipment—the tools, robots and assembly lines that drive productivity. Investment in these assets fell by 3.3 per cent between 2014 and 2024 despite population growth and modest economic growth.

Investment in these key areas drives productivity, a metric Canada has performed on quite poorly in recent years. To increase both productivity and wages, companies need to invest in better capital. But investment per worker has plummeted. In 2014, Canadian companies were investing roughly $20,900 per worker. In 2024, that number had dropped to just $17,600. Business investment per worker is just 55 cents in Canada for every dollar invested in the U.S. If anyone is looking for evidence that Canada is facing an investment crisis, this is it.

Compare Canada to other countries, and the numbers become even more concerning. Business investment in Canada per worker, adjusted for inflation, fell by 16 per cent between 2014 and 2024. On the other hand, business investment in the U.S. rose by 26 per cent over the same period. Canada is also trailing the United Kingdom, the European Union and much of the OECD.

Research and development is another key area that indicates the relative health of an economy. Back in 2000, business spending on research and development in Canada represented 77 per cent of the OECD average. In 2023, that number had collapsed to 57 per cent.

Consider this startling statistic: Amazon alone now spends almost three times more on research and development than Canada’s entire business sector combined. If that’s not a scary statistic, nothing is.

Reversing these trends won’t be easy. Years of underinvestment in Canada and its workers cannot be undone overnight. The Carney government appears to believe more government spending is the answer. It isn’t. Only the private sector can reverse the decline, but that won’t happen without major policy changes from Ottawa and the provinces.

To reverse these trends, governments must lower corporate taxes, reduce taxes on upper-income earners, scrap the industrial carbon tax and cut job-killing regulations. Half measures won’t work. Unless politicians are prepared to tackle these problems head-on, Canada’s investment crisis will deepen, productivity will continue to lag and Canadians will be poorer for it.

Dr. Jay Goldberg is a political scientist, a fellow with the Frontier Centre for Public Policy, and a columnist whose work is syndicated in the Toronto Sun and Winnipeg Sun. His policy analysis focuses on fiscal, trade, and energy issues.