Canada’s Economic Reality: A Shrinking Private Sector and the Rise of a Zombie Economy
To truly understand what’s happening in Canada, you have to live here. While it’s true that some Canadians are boycotting American products out of national pride—particularly in response to criticisms from figures like Donald Trump—that only scratches the surface. The deeper, more troubling reality is this: Canada is broke.
Were it not for the massive injection of printed money, Canada would already be in a full-blown depression. The domestic economy is contracting, and yet the foreign exchange markets continue to reward the Canadian dollar. Why? Because investors still see potential in Canada—as long as the country is governed competently. But that potential is diminishing.
The Shift from Dining Out to Eating In
Inflation and declining purchasing power have caused noticeable changes in consumer behavior. Fast food is becoming a luxury, and grocery stores are gaining market share at the expense of restaurants. Canadians can buy more at the grocery store for a fraction of what a single meal costs at a restaurant.
This shift isn’t just about consumer preference—it’s about economic necessity. As the Canadian economy continues to deflate, disposable income is drying up, and households are cutting back.
A Growing Deficit, a Shrinking Private Sector
On paper, the numbers may not look catastrophic. That’s because the federal government is running record-high deficits, and much of the borrowed money hasn’t yet entered circulation. But when it does, the consequences may be severe.
Over the past decade, government spending has yielded virtually no return on investment. Instead of stimulating private-sector growth, public funds have increasingly gone toward expanding the public sector, while private sector jobs continue to disappear.
This imbalance poses a long-term risk. As unfunded liabilities accumulate—particularly for pensions and healthcare—a clearer picture of Canada’s economic fragility emerges. The country is propped up by an asset bubble, and sectors like hospitality are suffering not only from reduced demand, but also from rising lease costs and energy prices.
The Zombie Economy: Worse Than Japan?
By many indicators, Canada is headed toward a deflationary spiral, which will likely be masked by ongoing monetary expansion (i.e., more money printing). This creates the conditions for a zombie economy—a system where growth is only sustained through artificial means, not organic productivity.
Some compare this scenario to Japan. But Japan’s economic stagnation is arguably more stable: Japan doesn’t carry the same level of unfunded liabilities, nor does it face as steep a demographic and talent crisis.
In Canada, retirements are accelerating and the tax base is shrinking, driven by brain drain and the erosion of private sector opportunity. If left unchecked, this trajectory could severely impact Canada’s ability to fund its public obligations, let alone foster meaningful economic growth.