Our financial system saved us from the worst of the 2009 crisis, now it’s holding our economy back

Discussion of Canada’s lagging productivity performance was missing from the recent federal election campaign, which is perhaps no surprise. It’s not a subject that lends itself to daily announcements and photo ops. But now that the electoral dust has settled it’s time to take steps to address the issue.

Surprisingly, however, the financial services sector’s contribution to overall productivity growth is underwhelming. Using the OECD measure of industry contribution to productivity, from 2001-2017, we rank behind countries we are often compared with, such as Australia, Norway and Sweden.

Fintechs that lend to businesses, on the other hand, often face onerous regulations similar to those faced by their traditional brick-and-mortar counterparts. That leads to an unlevel playing field, where these small but innovative firms have to adhere to regulations meant for systemically important financial institutions. To alleviate these concerns without sacrificing safety and stability, regulations should be more function-based and less entity-based, i.e.

Canada also scores poorly in small business lending, both as a share of total business lending and as a percentage of GDP, and it has one of the largest spreads between interest rates on loans to large businesses and loans to small and medium businesses .

'The sector not only employs relatively more educated workers and generates higher earnings than the rest of the economy, it has the unique ability to boost the entire economy’s productivity while boosting its own.' Bullshit, the economy's not related to whom you hire ...

Don't throw away your umbrella just because you're not getting wet right now.

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